Dr. R.K.Panda in Bhubaneswar, January 30, 2026: The GDP growth rate of the Indian economy has remained robust in the post-pandemic period. As estimates show the growth rates have remained at 9.7 percent in in FY 2021-22, followed by 7.0 percent in FY2022-23, 8.2 percent in FY2023-24, 6.5 percent in FY2024-25 and 7.4 percent in FY2025-26. Looking at the GDP growth performance over the period, the country has been projected by the World Bank and IMF asthe fastest growing major economy in the world.

However, in the context of the vision set to transform India into a Viksit Bharat (Developed India) by the year 2047, economists have worked out ahigher GDP growth rate– more than 8 percent annually needs to be achieved during the next two decades. Here the issue is in view of the wide discrepancy between the targeted GDP growth rate and current GDP growth rate how far the country can achieve Viksit Bharat by 2047. Since the composition of a country’s GDP influences the pace and pattern of its growthwe here have tried to throw light on the current composition of India’s GDP growth and underline the compositional changes required for achieving higher and sustainable GDP growth rate within the stipulated time period.

The computation of GDP is estimated by the National Statistics Office under the Ministry of Statistics and Programme Evaluation, Government of India.As per the expenditure method,the GDP(Y) is composed of C+I+G+NX, where C stands for individual/ household consumption, I for investment- private and public, G for government spending and NX is the net export earnings.

As literature reveals the Indian GDP is predominantly driven by domestic demand particularly consumption demand. Data reported in published documents revealthat individual/ household’s private consumption accounts nearly 60 percent share of the GDP in 2024-25 followed by investment contributing around 30 percent and government consumption 10 percent. Net exports show a negative share as the country exhibits wide trade gap – imports exceeding exports.

In view of the consumption demand occupying a predominant share in the composition of GDP, boosting domestic consumption is frequently argued as a strategy for increasing the GDP growth rate. Recently the RBI bulletin suggests for raising consumption to rekindle animal spirits among the entrepreneurs for higher investment in the economy. No doubt this may be away of raising investment, incomeand GDP with the help of increasing consumption, but this is bound to beless sustainable.

High consumption does not always spur robust investment / income for sustainable development. Income-led growth in contrast creates sustainable demand. In a country like India where quite a large percentage of households live in poverty or near poverty with minimum level consumption and largely limited to only essentials, theincrease in consumption will not significantly enhance productive capacityleading to higher and sustainable growth.

However, during the last year some fiscal initiatives have been taken by the Government of Indiato raise domestic demand, particularly consumption demand. In the last annual budget the Finance Minister has slashed Personal Income Tax rates to facilitate the largely the consumption of the middle class.A few months later the GST revisions were taken up. The revision along with simplifying the tax structure and has reduced GST rates ofsome essentials items aiming at improving demand for a number of consumable articles.

No doubt as reported by the media, all these fiscal measure shave improved consumption demand in the economy but their implications on growth via rise in investment and job creation are yet to be quantified. The consumers’ behavior in the country is guided by many considerations over and above fall in prices. Recently as cited by some large Retail Executives, sales of different consumable articles have shown slowing down in various parts of the country owing to weather-related disruptions.

As we are well aware that the consumption-led growth suffers from weaker multiplier effect, it does not help much in building long-term capacity for higher sustainable growth. In contrast income-led growth builds productive assets creating stronger multiplier effects, jobs and sustainable capacity. This suggests that the fiscal measures need to have an integrated approach for boosting consumption as well as investment in creating jobs and raising income for a higher and sustainable growth in GDP. Investment-driven growth in sectors like manufacturing, infrastructure needs to be supported by budgetary allocations.

The RBI Governor describes the Indian economy in a Goldilocks phase implying an economy having a steady and moderate growth with low inflation and stable interest rates exhibiting a just right environment for business and consumers. But while the overall scenario remains positive it needs to be triggered by boosting income/investment.

Can we hope the coming budget addresses such issues? Can the budget 2026-27 focus on job creation by allocating significant funds?

• Formerly, Professor of Economics, Utkal University and Director NKC Centre for Development Studies, Bhubaneswar