Medium Term Outlook: Deregulation Drives Growth (2024-25) | Indian Economy for UPSC CSE PDF Download

 Page 1


05
CHAPTER
133
MEDIUM TERM OUTLOOK: 
DEREGULATION DRIVES GROWTH
May we live in interesting times!
1
 This Chinese proverb, often understood as 
an indication of impending turbulence, is pertinent. Worldwide, we see a 
backsliding of economic integration with geo-economic fragmentation replacing 
globalisation. Economic realignments and readjustments are imminent. The rise 
of China as a manufacturing powerhouse and its impact on the manufacturing 
aspirations of other nations, as well as the supply of minerals, materials, machinery, 
and equipment needed for energy transition, pose challenges.
Amidst this, India is in the middle of a change that represents an unprecedented 
economic challenge and opportunity. This chapter examines the India Story in 
this context. It suggests policy responses with special emphasis on the importance 
of domestic growth levers and the shedding of regulatory compliance burden. 
Enhancing economic freedom for individuals and small businesses is arguably 
the most important policy priority to define and bolster India's medium-term 
growth prospects.
INDIA'S MEDIUM-TERM OUTLOOK
5.1 To realise its economic aspirations of becoming Viksit Bharat by the time of the 
centenary of independence, India needs to achieve a growth rate of around 8 per cent 
at constant prices, on average, for about a decade or two. While the desirability of this 
growth rate is unquestionable, it's important to recognise that the global environment 
– political and economic – will influence India's growth outcomes. 
5.2 The projections for India from the lens of the World Economic Outlook (WEO) 
of the International Monetary Fund (referred to as IMF or the Fund interchangeably 
in the rest of this chapter) as recently as October of FY25 are sanguine. The IMF WEO 
projects India to become a USD 5 trillion economy by FY28 and reach a size of USD 
6.307 trillion by FY30 [Chart V.1]. This translates into an annual nominal growth rate 
1  This quote is understood as an apocryphal English interpretation of an ancient Chinese curse and has been 
inaccurately attributed to a number of individuals. Van Norden, Bryan William (2011). "II. Criticisms and 
Confucianism". Introduction to Classical Chinese Philosophy. [p. 257]
Page 2


05
CHAPTER
133
MEDIUM TERM OUTLOOK: 
DEREGULATION DRIVES GROWTH
May we live in interesting times!
1
 This Chinese proverb, often understood as 
an indication of impending turbulence, is pertinent. Worldwide, we see a 
backsliding of economic integration with geo-economic fragmentation replacing 
globalisation. Economic realignments and readjustments are imminent. The rise 
of China as a manufacturing powerhouse and its impact on the manufacturing 
aspirations of other nations, as well as the supply of minerals, materials, machinery, 
and equipment needed for energy transition, pose challenges.
Amidst this, India is in the middle of a change that represents an unprecedented 
economic challenge and opportunity. This chapter examines the India Story in 
this context. It suggests policy responses with special emphasis on the importance 
of domestic growth levers and the shedding of regulatory compliance burden. 
Enhancing economic freedom for individuals and small businesses is arguably 
the most important policy priority to define and bolster India's medium-term 
growth prospects.
INDIA'S MEDIUM-TERM OUTLOOK
5.1 To realise its economic aspirations of becoming Viksit Bharat by the time of the 
centenary of independence, India needs to achieve a growth rate of around 8 per cent 
at constant prices, on average, for about a decade or two. While the desirability of this 
growth rate is unquestionable, it's important to recognise that the global environment 
– political and economic – will influence India's growth outcomes. 
5.2 The projections for India from the lens of the World Economic Outlook (WEO) 
of the International Monetary Fund (referred to as IMF or the Fund interchangeably 
in the rest of this chapter) as recently as October of FY25 are sanguine. The IMF WEO 
projects India to become a USD 5 trillion economy by FY28 and reach a size of USD 
6.307 trillion by FY30 [Chart V.1]. This translates into an annual nominal growth rate 
1  This quote is understood as an apocryphal English interpretation of an ancient Chinese curse and has been 
inaccurately attributed to a number of individuals. Van Norden, Bryan William (2011). "II. Criticisms and 
Confucianism". Introduction to Classical Chinese Philosophy. [p. 257]
Economic Survey 2024-25
134
of nearly 10.2 per cent in USD terms for FY25 to FY30.
2
 To put this in context, in the 
thirty years between FY94 and FY24, India's dollar gross domestic product (GDP) grew 
at a compounded annual rate of 8.9 per cent. So, the IMF expects India to grow at a 
significantly higher rate of 10.2 per cent in dollar terms in the next five years. 
Chart V.1: IMF WEO India projections from FY25 to FY30
 
3.6
3.9
4.3
4.7
5.2
5.7
6.3
USD Trillion
GDP at current prices
  
82.8
83.6
84.0
84.4
84.8
85.2
85.6
INR/USD
Exchange Rate
Source: WEO, October 2024
5.3 In rupee terms, India's nominal GDP grew at a compounded annual rate of 12.4 
per cent in the three decades ending FY24. In the next five years, the IMF projects that 
India's nominal GDP will grow at around 10.7 per cent annually. So, in effect, given the 
projected growth rate of only 10.2 per cent in dollar terms, the Fund expects the rupee 
to weaken, on average, only by 0.5 per cent per annum in the next five years, compared 
to the 3.3 per cent annual depreciation experienced in the three decades up to FY24. 
The projected mild rupee depreciation is a recognition of India's growth potential, 
its attractiveness as an investment destination and the expectation of convergence of 
India's inflation rate with that of the United States. The Fund also projects that India's 
current account deficit will rise gently and gradually to 2.2 per cent of GDP by FY30. To 
reiterate, given the current state of the world and its likely evolution, the realisation of 
these projections will be a very good thing for India. 
5.4 The Ministry of Statistics and Programme Implementation reckons in the first 
advance estimate the economy will grow at 6.4 per cent in constant prices. For FY26, 
we project a growth rate of between 6.3 per cent and 6.8 per cent in the first chapter 
of this Survey. This is in line with the Fund's projection of the growth rate of India's 
2  India’s GDP growth at constant prices adjusted for the inflation differential between India and the USA gives us 
the estimate of GDP in USD terms. Thus, GDP expressed in a numeraire currency like the USD accounts for prices. 
That is why it is also a measure of ‘real’ GDP.
Page 3


05
CHAPTER
133
MEDIUM TERM OUTLOOK: 
DEREGULATION DRIVES GROWTH
May we live in interesting times!
1
 This Chinese proverb, often understood as 
an indication of impending turbulence, is pertinent. Worldwide, we see a 
backsliding of economic integration with geo-economic fragmentation replacing 
globalisation. Economic realignments and readjustments are imminent. The rise 
of China as a manufacturing powerhouse and its impact on the manufacturing 
aspirations of other nations, as well as the supply of minerals, materials, machinery, 
and equipment needed for energy transition, pose challenges.
Amidst this, India is in the middle of a change that represents an unprecedented 
economic challenge and opportunity. This chapter examines the India Story in 
this context. It suggests policy responses with special emphasis on the importance 
of domestic growth levers and the shedding of regulatory compliance burden. 
Enhancing economic freedom for individuals and small businesses is arguably 
the most important policy priority to define and bolster India's medium-term 
growth prospects.
INDIA'S MEDIUM-TERM OUTLOOK
5.1 To realise its economic aspirations of becoming Viksit Bharat by the time of the 
centenary of independence, India needs to achieve a growth rate of around 8 per cent 
at constant prices, on average, for about a decade or two. While the desirability of this 
growth rate is unquestionable, it's important to recognise that the global environment 
– political and economic – will influence India's growth outcomes. 
5.2 The projections for India from the lens of the World Economic Outlook (WEO) 
of the International Monetary Fund (referred to as IMF or the Fund interchangeably 
in the rest of this chapter) as recently as October of FY25 are sanguine. The IMF WEO 
projects India to become a USD 5 trillion economy by FY28 and reach a size of USD 
6.307 trillion by FY30 [Chart V.1]. This translates into an annual nominal growth rate 
1  This quote is understood as an apocryphal English interpretation of an ancient Chinese curse and has been 
inaccurately attributed to a number of individuals. Van Norden, Bryan William (2011). "II. Criticisms and 
Confucianism". Introduction to Classical Chinese Philosophy. [p. 257]
Economic Survey 2024-25
134
of nearly 10.2 per cent in USD terms for FY25 to FY30.
2
 To put this in context, in the 
thirty years between FY94 and FY24, India's dollar gross domestic product (GDP) grew 
at a compounded annual rate of 8.9 per cent. So, the IMF expects India to grow at a 
significantly higher rate of 10.2 per cent in dollar terms in the next five years. 
Chart V.1: IMF WEO India projections from FY25 to FY30
 
3.6
3.9
4.3
4.7
5.2
5.7
6.3
USD Trillion
GDP at current prices
  
82.8
83.6
84.0
84.4
84.8
85.2
85.6
INR/USD
Exchange Rate
Source: WEO, October 2024
5.3 In rupee terms, India's nominal GDP grew at a compounded annual rate of 12.4 
per cent in the three decades ending FY24. In the next five years, the IMF projects that 
India's nominal GDP will grow at around 10.7 per cent annually. So, in effect, given the 
projected growth rate of only 10.2 per cent in dollar terms, the Fund expects the rupee 
to weaken, on average, only by 0.5 per cent per annum in the next five years, compared 
to the 3.3 per cent annual depreciation experienced in the three decades up to FY24. 
The projected mild rupee depreciation is a recognition of India's growth potential, 
its attractiveness as an investment destination and the expectation of convergence of 
India's inflation rate with that of the United States. The Fund also projects that India's 
current account deficit will rise gently and gradually to 2.2 per cent of GDP by FY30. To 
reiterate, given the current state of the world and its likely evolution, the realisation of 
these projections will be a very good thing for India. 
5.4 The Ministry of Statistics and Programme Implementation reckons in the first 
advance estimate the economy will grow at 6.4 per cent in constant prices. For FY26, 
we project a growth rate of between 6.3 per cent and 6.8 per cent in the first chapter 
of this Survey. This is in line with the Fund's projection of the growth rate of India's 
2  India’s GDP growth at constant prices adjusted for the inflation differential between India and the USA gives us 
the estimate of GDP in USD terms. Thus, GDP expressed in a numeraire currency like the USD accounts for prices. 
That is why it is also a measure of ‘real’ GDP.
Medium Term Outlook
135
GDP at constant prices at around 6.5 per cent between FY26 and FY30. This chapter 
explores the policy action agenda to help us achieve or exceed these growth rates.
5.5 It begins by sketching out the global economic and political environment. The 
first section delves into the reality of geo-economic fragmentation and examines its 
implications for global growth. The second section outlines the case for acknowledging 
the elephant [and the dragon] in the room that will have a bearing on the growth 
projections – fundamental shifts in the global economic order combined with 
China's manufacturing prowess and strategic dominance. The third section probes 
into a key channel of the slightly less acknowledged but critical aspect of China's 
dominance, viz., dependency of the global economy on it for energy transition efforts. 
India has ambitious goals for energy transition despite being one of the lowest per 
capita emitters of greenhouse gases. Dependence on China-made goods to achieve 
that transition enhances the complexity of the challenge for India. The fourth section 
sheds light on the need to focus on domestic growth levers for India, given the global 
context and challenges outlined. It makes a case for trusting the ingenuity of people 
and organisations and using policy to enhance their economic freedoms, which will 
give impetus to growth in line with the projections of WEO. The last section takes a 
deep dive into specific aspects of systematic deregulation that need to be focussed on 
to facilitate economic freedom for individuals and businesses so that India's medium-
term growth prospects remain strong.
GEO-ECONOMIC FRAGMENTATION – THIS TIME MAY BE 
DIFFERENT
5.6 In one of his seminal pieces, 'The Economic Consequences of Peace', John 
Maynard Keynes writes about early twentieth-century London, 'the inhabitant 
of London could order by telephone, sipping his morning tea in bed, the various 
products of the whole earth, in such quantity as he might see fit, and reasonably 
expect their early delivery upon his doorstep; he could at the same moment and by 
the same means adventure his wealth in the natural resources and new enterprises 
of any quarter of the world, and share, without exertion or even trouble, in their 
prospective fruits and advantages'. 
5.7 Keynes was describing a state of affairs not unlike the one to which we have 
become accustomed over the past few decades of hyper-globalisation, wherein the 
flows of capital, goods, services, and people have transformed our world, helped by 
the spread of new technologies and ideas. These forces of integration have boosted 
productivity and living standards, tripling the size of the global economy and lifting 
1.3 billion people out of extreme poverty. 
Page 4


05
CHAPTER
133
MEDIUM TERM OUTLOOK: 
DEREGULATION DRIVES GROWTH
May we live in interesting times!
1
 This Chinese proverb, often understood as 
an indication of impending turbulence, is pertinent. Worldwide, we see a 
backsliding of economic integration with geo-economic fragmentation replacing 
globalisation. Economic realignments and readjustments are imminent. The rise 
of China as a manufacturing powerhouse and its impact on the manufacturing 
aspirations of other nations, as well as the supply of minerals, materials, machinery, 
and equipment needed for energy transition, pose challenges.
Amidst this, India is in the middle of a change that represents an unprecedented 
economic challenge and opportunity. This chapter examines the India Story in 
this context. It suggests policy responses with special emphasis on the importance 
of domestic growth levers and the shedding of regulatory compliance burden. 
Enhancing economic freedom for individuals and small businesses is arguably 
the most important policy priority to define and bolster India's medium-term 
growth prospects.
INDIA'S MEDIUM-TERM OUTLOOK
5.1 To realise its economic aspirations of becoming Viksit Bharat by the time of the 
centenary of independence, India needs to achieve a growth rate of around 8 per cent 
at constant prices, on average, for about a decade or two. While the desirability of this 
growth rate is unquestionable, it's important to recognise that the global environment 
– political and economic – will influence India's growth outcomes. 
5.2 The projections for India from the lens of the World Economic Outlook (WEO) 
of the International Monetary Fund (referred to as IMF or the Fund interchangeably 
in the rest of this chapter) as recently as October of FY25 are sanguine. The IMF WEO 
projects India to become a USD 5 trillion economy by FY28 and reach a size of USD 
6.307 trillion by FY30 [Chart V.1]. This translates into an annual nominal growth rate 
1  This quote is understood as an apocryphal English interpretation of an ancient Chinese curse and has been 
inaccurately attributed to a number of individuals. Van Norden, Bryan William (2011). "II. Criticisms and 
Confucianism". Introduction to Classical Chinese Philosophy. [p. 257]
Economic Survey 2024-25
134
of nearly 10.2 per cent in USD terms for FY25 to FY30.
2
 To put this in context, in the 
thirty years between FY94 and FY24, India's dollar gross domestic product (GDP) grew 
at a compounded annual rate of 8.9 per cent. So, the IMF expects India to grow at a 
significantly higher rate of 10.2 per cent in dollar terms in the next five years. 
Chart V.1: IMF WEO India projections from FY25 to FY30
 
3.6
3.9
4.3
4.7
5.2
5.7
6.3
USD Trillion
GDP at current prices
  
82.8
83.6
84.0
84.4
84.8
85.2
85.6
INR/USD
Exchange Rate
Source: WEO, October 2024
5.3 In rupee terms, India's nominal GDP grew at a compounded annual rate of 12.4 
per cent in the three decades ending FY24. In the next five years, the IMF projects that 
India's nominal GDP will grow at around 10.7 per cent annually. So, in effect, given the 
projected growth rate of only 10.2 per cent in dollar terms, the Fund expects the rupee 
to weaken, on average, only by 0.5 per cent per annum in the next five years, compared 
to the 3.3 per cent annual depreciation experienced in the three decades up to FY24. 
The projected mild rupee depreciation is a recognition of India's growth potential, 
its attractiveness as an investment destination and the expectation of convergence of 
India's inflation rate with that of the United States. The Fund also projects that India's 
current account deficit will rise gently and gradually to 2.2 per cent of GDP by FY30. To 
reiterate, given the current state of the world and its likely evolution, the realisation of 
these projections will be a very good thing for India. 
5.4 The Ministry of Statistics and Programme Implementation reckons in the first 
advance estimate the economy will grow at 6.4 per cent in constant prices. For FY26, 
we project a growth rate of between 6.3 per cent and 6.8 per cent in the first chapter 
of this Survey. This is in line with the Fund's projection of the growth rate of India's 
2  India’s GDP growth at constant prices adjusted for the inflation differential between India and the USA gives us 
the estimate of GDP in USD terms. Thus, GDP expressed in a numeraire currency like the USD accounts for prices. 
That is why it is also a measure of ‘real’ GDP.
Medium Term Outlook
135
GDP at constant prices at around 6.5 per cent between FY26 and FY30. This chapter 
explores the policy action agenda to help us achieve or exceed these growth rates.
5.5 It begins by sketching out the global economic and political environment. The 
first section delves into the reality of geo-economic fragmentation and examines its 
implications for global growth. The second section outlines the case for acknowledging 
the elephant [and the dragon] in the room that will have a bearing on the growth 
projections – fundamental shifts in the global economic order combined with 
China's manufacturing prowess and strategic dominance. The third section probes 
into a key channel of the slightly less acknowledged but critical aspect of China's 
dominance, viz., dependency of the global economy on it for energy transition efforts. 
India has ambitious goals for energy transition despite being one of the lowest per 
capita emitters of greenhouse gases. Dependence on China-made goods to achieve 
that transition enhances the complexity of the challenge for India. The fourth section 
sheds light on the need to focus on domestic growth levers for India, given the global 
context and challenges outlined. It makes a case for trusting the ingenuity of people 
and organisations and using policy to enhance their economic freedoms, which will 
give impetus to growth in line with the projections of WEO. The last section takes a 
deep dive into specific aspects of systematic deregulation that need to be focussed on 
to facilitate economic freedom for individuals and businesses so that India's medium-
term growth prospects remain strong.
GEO-ECONOMIC FRAGMENTATION – THIS TIME MAY BE 
DIFFERENT
5.6 In one of his seminal pieces, 'The Economic Consequences of Peace', John 
Maynard Keynes writes about early twentieth-century London, 'the inhabitant 
of London could order by telephone, sipping his morning tea in bed, the various 
products of the whole earth, in such quantity as he might see fit, and reasonably 
expect their early delivery upon his doorstep; he could at the same moment and by 
the same means adventure his wealth in the natural resources and new enterprises 
of any quarter of the world, and share, without exertion or even trouble, in their 
prospective fruits and advantages'. 
5.7 Keynes was describing a state of affairs not unlike the one to which we have 
become accustomed over the past few decades of hyper-globalisation, wherein the 
flows of capital, goods, services, and people have transformed our world, helped by 
the spread of new technologies and ideas. These forces of integration have boosted 
productivity and living standards, tripling the size of the global economy and lifting 
1.3 billion people out of extreme poverty. 
Economic Survey 2024-25
136
5.8 However, just like Keynes' description of how the prosperity of Londoner was 
destroyed by 'the projects and politics of militarism and imperialism, of racial 
and cultural rivalries, of monopolies, restrictions, and exclusion', we can draw 
uncomfortable parallels with the present-day era wherein the global economy is once 
again confronted with the challenge of geo-economic fragmentation (GEF). This time, 
it is of a scale, scope and complexity that is likely more severe in its impact than what 
the world witnessed in the early 20th century. 
5.9 The decades since the 1980s have witnessed significant globalisation, marked by 
remarkable shifts in global trade, investment, and economic activity. Here are some key 
statistics:
Global trade growth: In 1980, global trade accounted for about 39 per cent of world 
GDP. By 2012, this share had risen to 60 per cent, reflecting the deep integration of 
global markets.
Foreign direct investment (FDI): Global FDI inflows grew from USD 54 billion in 
1980 to over USD 1.5 trillion in 2019, showcasing the increasing role of multinational 
corporations in cross-border investments.
Economic growth and poverty reduction: The global economy grew from USD 11 
trillion in 1980 to over USD 100 trillion in 2022 (nominal).
Extreme poverty rates (those living on less than USD 2.15 a day) fell from 42 per cent of 
the global population in 1981 to 8.4 per cent in 2019, driven by rapid economic growth 
in countries like China and India.
Global population and urbanisation:
The global population grew from 4.4 billion in 1980 to 8 billion in 2022, with urbanisation 
rates rising from 39 per cent in 1980 to 57 per cent in 2022, fuelling economic activity 
and connectivity.
Internet penetration: In 1980, internet connectivity was virtually non-existent. By 
2022, over 5.3 billion people, or 66 per cent of the global population, had access to the 
internet, revolutionising communication, trade, and innovation.
These statistics illustrate the profound changes globalisation has brought, driving 
economic integration and altering the global economic landscape. But, the next two 
decades are more likely to be about economic fragmentation.
5.10  Aiyar et al. (2023)
3
 define 'geo-economic fragmentation' as a policy-driven 
reversal of global economic integration often guided by strategic considerations. 
This process encompasses different channels, including trade, capital, and migration 
3  Aiyar, S, J Chen, C Ebeke, R Garcia-Saltos, T Gudmundsson, A Ilyina, A Kangur, S Rodriguez, M Ruta, T Schulze, J 
Trevino, T Kunaratskul and G Soderberg (2023), “Geoeconomic Fragmentation and the Future of Multilateralism”, 
IMF Staff Discussion Note SDN/2023/01, https://tinyurl.com/ym4jdfy8. 
Page 5


05
CHAPTER
133
MEDIUM TERM OUTLOOK: 
DEREGULATION DRIVES GROWTH
May we live in interesting times!
1
 This Chinese proverb, often understood as 
an indication of impending turbulence, is pertinent. Worldwide, we see a 
backsliding of economic integration with geo-economic fragmentation replacing 
globalisation. Economic realignments and readjustments are imminent. The rise 
of China as a manufacturing powerhouse and its impact on the manufacturing 
aspirations of other nations, as well as the supply of minerals, materials, machinery, 
and equipment needed for energy transition, pose challenges.
Amidst this, India is in the middle of a change that represents an unprecedented 
economic challenge and opportunity. This chapter examines the India Story in 
this context. It suggests policy responses with special emphasis on the importance 
of domestic growth levers and the shedding of regulatory compliance burden. 
Enhancing economic freedom for individuals and small businesses is arguably 
the most important policy priority to define and bolster India's medium-term 
growth prospects.
INDIA'S MEDIUM-TERM OUTLOOK
5.1 To realise its economic aspirations of becoming Viksit Bharat by the time of the 
centenary of independence, India needs to achieve a growth rate of around 8 per cent 
at constant prices, on average, for about a decade or two. While the desirability of this 
growth rate is unquestionable, it's important to recognise that the global environment 
– political and economic – will influence India's growth outcomes. 
5.2 The projections for India from the lens of the World Economic Outlook (WEO) 
of the International Monetary Fund (referred to as IMF or the Fund interchangeably 
in the rest of this chapter) as recently as October of FY25 are sanguine. The IMF WEO 
projects India to become a USD 5 trillion economy by FY28 and reach a size of USD 
6.307 trillion by FY30 [Chart V.1]. This translates into an annual nominal growth rate 
1  This quote is understood as an apocryphal English interpretation of an ancient Chinese curse and has been 
inaccurately attributed to a number of individuals. Van Norden, Bryan William (2011). "II. Criticisms and 
Confucianism". Introduction to Classical Chinese Philosophy. [p. 257]
Economic Survey 2024-25
134
of nearly 10.2 per cent in USD terms for FY25 to FY30.
2
 To put this in context, in the 
thirty years between FY94 and FY24, India's dollar gross domestic product (GDP) grew 
at a compounded annual rate of 8.9 per cent. So, the IMF expects India to grow at a 
significantly higher rate of 10.2 per cent in dollar terms in the next five years. 
Chart V.1: IMF WEO India projections from FY25 to FY30
 
3.6
3.9
4.3
4.7
5.2
5.7
6.3
USD Trillion
GDP at current prices
  
82.8
83.6
84.0
84.4
84.8
85.2
85.6
INR/USD
Exchange Rate
Source: WEO, October 2024
5.3 In rupee terms, India's nominal GDP grew at a compounded annual rate of 12.4 
per cent in the three decades ending FY24. In the next five years, the IMF projects that 
India's nominal GDP will grow at around 10.7 per cent annually. So, in effect, given the 
projected growth rate of only 10.2 per cent in dollar terms, the Fund expects the rupee 
to weaken, on average, only by 0.5 per cent per annum in the next five years, compared 
to the 3.3 per cent annual depreciation experienced in the three decades up to FY24. 
The projected mild rupee depreciation is a recognition of India's growth potential, 
its attractiveness as an investment destination and the expectation of convergence of 
India's inflation rate with that of the United States. The Fund also projects that India's 
current account deficit will rise gently and gradually to 2.2 per cent of GDP by FY30. To 
reiterate, given the current state of the world and its likely evolution, the realisation of 
these projections will be a very good thing for India. 
5.4 The Ministry of Statistics and Programme Implementation reckons in the first 
advance estimate the economy will grow at 6.4 per cent in constant prices. For FY26, 
we project a growth rate of between 6.3 per cent and 6.8 per cent in the first chapter 
of this Survey. This is in line with the Fund's projection of the growth rate of India's 
2  India’s GDP growth at constant prices adjusted for the inflation differential between India and the USA gives us 
the estimate of GDP in USD terms. Thus, GDP expressed in a numeraire currency like the USD accounts for prices. 
That is why it is also a measure of ‘real’ GDP.
Medium Term Outlook
135
GDP at constant prices at around 6.5 per cent between FY26 and FY30. This chapter 
explores the policy action agenda to help us achieve or exceed these growth rates.
5.5 It begins by sketching out the global economic and political environment. The 
first section delves into the reality of geo-economic fragmentation and examines its 
implications for global growth. The second section outlines the case for acknowledging 
the elephant [and the dragon] in the room that will have a bearing on the growth 
projections – fundamental shifts in the global economic order combined with 
China's manufacturing prowess and strategic dominance. The third section probes 
into a key channel of the slightly less acknowledged but critical aspect of China's 
dominance, viz., dependency of the global economy on it for energy transition efforts. 
India has ambitious goals for energy transition despite being one of the lowest per 
capita emitters of greenhouse gases. Dependence on China-made goods to achieve 
that transition enhances the complexity of the challenge for India. The fourth section 
sheds light on the need to focus on domestic growth levers for India, given the global 
context and challenges outlined. It makes a case for trusting the ingenuity of people 
and organisations and using policy to enhance their economic freedoms, which will 
give impetus to growth in line with the projections of WEO. The last section takes a 
deep dive into specific aspects of systematic deregulation that need to be focussed on 
to facilitate economic freedom for individuals and businesses so that India's medium-
term growth prospects remain strong.
GEO-ECONOMIC FRAGMENTATION – THIS TIME MAY BE 
DIFFERENT
5.6 In one of his seminal pieces, 'The Economic Consequences of Peace', John 
Maynard Keynes writes about early twentieth-century London, 'the inhabitant 
of London could order by telephone, sipping his morning tea in bed, the various 
products of the whole earth, in such quantity as he might see fit, and reasonably 
expect their early delivery upon his doorstep; he could at the same moment and by 
the same means adventure his wealth in the natural resources and new enterprises 
of any quarter of the world, and share, without exertion or even trouble, in their 
prospective fruits and advantages'. 
5.7 Keynes was describing a state of affairs not unlike the one to which we have 
become accustomed over the past few decades of hyper-globalisation, wherein the 
flows of capital, goods, services, and people have transformed our world, helped by 
the spread of new technologies and ideas. These forces of integration have boosted 
productivity and living standards, tripling the size of the global economy and lifting 
1.3 billion people out of extreme poverty. 
Economic Survey 2024-25
136
5.8 However, just like Keynes' description of how the prosperity of Londoner was 
destroyed by 'the projects and politics of militarism and imperialism, of racial 
and cultural rivalries, of monopolies, restrictions, and exclusion', we can draw 
uncomfortable parallels with the present-day era wherein the global economy is once 
again confronted with the challenge of geo-economic fragmentation (GEF). This time, 
it is of a scale, scope and complexity that is likely more severe in its impact than what 
the world witnessed in the early 20th century. 
5.9 The decades since the 1980s have witnessed significant globalisation, marked by 
remarkable shifts in global trade, investment, and economic activity. Here are some key 
statistics:
Global trade growth: In 1980, global trade accounted for about 39 per cent of world 
GDP. By 2012, this share had risen to 60 per cent, reflecting the deep integration of 
global markets.
Foreign direct investment (FDI): Global FDI inflows grew from USD 54 billion in 
1980 to over USD 1.5 trillion in 2019, showcasing the increasing role of multinational 
corporations in cross-border investments.
Economic growth and poverty reduction: The global economy grew from USD 11 
trillion in 1980 to over USD 100 trillion in 2022 (nominal).
Extreme poverty rates (those living on less than USD 2.15 a day) fell from 42 per cent of 
the global population in 1981 to 8.4 per cent in 2019, driven by rapid economic growth 
in countries like China and India.
Global population and urbanisation:
The global population grew from 4.4 billion in 1980 to 8 billion in 2022, with urbanisation 
rates rising from 39 per cent in 1980 to 57 per cent in 2022, fuelling economic activity 
and connectivity.
Internet penetration: In 1980, internet connectivity was virtually non-existent. By 
2022, over 5.3 billion people, or 66 per cent of the global population, had access to the 
internet, revolutionising communication, trade, and innovation.
These statistics illustrate the profound changes globalisation has brought, driving 
economic integration and altering the global economic landscape. But, the next two 
decades are more likely to be about economic fragmentation.
5.10  Aiyar et al. (2023)
3
 define 'geo-economic fragmentation' as a policy-driven 
reversal of global economic integration often guided by strategic considerations. 
This process encompasses different channels, including trade, capital, and migration 
3  Aiyar, S, J Chen, C Ebeke, R Garcia-Saltos, T Gudmundsson, A Ilyina, A Kangur, S Rodriguez, M Ruta, T Schulze, J 
Trevino, T Kunaratskul and G Soderberg (2023), “Geoeconomic Fragmentation and the Future of Multilateralism”, 
IMF Staff Discussion Note SDN/2023/01, https://tinyurl.com/ym4jdfy8. 
Medium Term Outlook
137
flows.
4
 Despite the benefits of integration, hyper-globalisation has also brought about 
associated complacencies. People have been left behind as industries have changed 
amid global competition. Rising geopolitical tensions and the breakout of war have 
further intensified these underlying fissures in the global economy. 
5.11 In a re-enactment of the cold war era, countries are once again getting grouped 
into two blocs and phrases like friend-shoring have come to play centre-stage in 
global policymaking. Tensions over trade, technology standards, and security have 
been growing for many years, undermining growth and trust in the current global 
economic system. Therefore, fragmentation - economic, social and cultural - is a direct 
consequence of the imposition of a 'one-size-fits-all' emission, as well as social and 
labour standards by western nations. These developments have growth implications.
Growth implications of geo-economic fragmentation 
5.12  The consequences and costs of GEF are propagated via all the channels whereby 
countries engage with each other economically. Trade is the main channel through which 
fragmentation is reshaping the global economy. The capacity of trade to incentivise 
within-industry reallocation and generate productivity gains is getting increasingly 
stifled. This is most evident in the increase in the trade-restrictive measures imposed 
by countries. As per figures released by the World Trade Organization (WTO) as part 
of the WTO Director-General's annual overview of global trade developments, there is 
a sharp rise in the coverage of trade-restrictive measures by WTO members between 
mid-October 2023 and mid-October 2024, compared to the last Trade Monitoring 
Report in November 2023 [Chart V.2].  
5.13  As per estimates, the value of trade covered by the 169 new trade-restrictive 
measures introduced between October 2023 and October 2024 is USD 887.7 billion, 
which is half a trillion dollars more than the value of trade covered by restrictions 
introduced in the preceding year, which stood at USD 337.1 billion.
5
 IMF
6
 observes 
that trade fragmentation is much more costly this time because, unlike the start of the 
cold war when goods trade to GDP was 16 per cent, now that ratio is 45 per cent. Less 
trade implies less knowledge diffusion, a key benefit of integration, which could also be 
reduced by fragmentation of cross-border direct investment. One way to visualise trade 
restrictiveness is to quantify the trade coverage of new import-restrictive measures, 
apart from the number of restrictive measures presented earlier (Chart V.2)
7
.
4  Ibid Note 3.
5  World Trade Organisation Annual Report by the Director General, 2024, https://tinyurl.com/5n6k4wb4.
6 ‘Geopolitics and its Impact on Global Trade and the Dollar’, Talk delivered by Gita Gopinath (IMF FDMD) in 
the Series on the Future of the International Monetary System (IMS) at Stanford Institute for Economic Policy 
Research, May 7, 2024, https://tinyurl.com/2ma3wkjw.
7  Ibid Note 5.