Strengthening Economic Momentum
Yet again, the government continued its thrust for sustainable growth and long-term economic stability through its distinctive policy interventions to touch $ 7.5 Trillion economic benchmark by 2030. Vividly, the economic outlook is shining. The major economic indicators are moving in the right direction, hinting at progressive momentum. The inflation is at a record low and under control at 2.6 percent. The fiscal deficit for the year 2026-27 is pegged at 4.3 percent of GDP, which is lower than last year, 2025-26, 4.4 percent. The GDP growth has surged to 7.4 percent and is expected to touch 8 percent in the next financial year. The autonomous public investment (of Rs 12.2 lakh crore for 2026-27 ) is appreciable and is above by almost 9 percent against 2025-26, whereas private investment sentiment is still damped. The average agricultural and industrial growth rates are impressive, at 7.2 percent and 4.3 percent, respectively. Meanwhile, the annual household saving rate of 30 percent of GDP indicates a continuous shift, moving from the conventional banking sector to market-linked investment instrument opportunities. The export growth (4.33 percent) is surging and may touch USD 850 billion by the close of 2025-26. The FDI is rising with a record inflow of USD 65 billion up to 2025, significantly from the service sector, computer software and hardware, telecommunications, and automobiles. These indicators suggest that the new policy measures are primarily aimed at accelerating progressive economic momentum to achieve the Viksit Bharat status. Nevertheless, the economy is facing some grave concerns, including struggling consumer demand, no upbeat in private investment, joblessness, income inequalities, high import tariffs, booming imports, a fragile global economic outlook, and, of course, gloomy consumer sentiments. All these economic issues need genuine policy interventions to strengthen and sustain the tempo of the economic growth and development agenda for accomplishing a developed economic status. Rightly, the mix of policy interventions unleashed through the recent budget aptly addresses all sectors and activities, including agriculture, manufacturing, and service sectors, with a renewed commitment of the government to make the lives and livelihoods of the masses much better and qualitative in times to come.
Visibly, employment-driven growth is abysmal even in the agriculture sector, which employs around 46 percent of the workforce. The sectors need to pay attention to horticulture, fisheries, and livestock having high potential for employment and income generation. Rightly, the government swelled its allocation to agriculture and its allied sectors in 2026-27 to Rs 1.63 lakh crore and emphasized technology-led farming, like expanded funding for AI-driven advisory platforms (Bharat VISTAAR), farm drones, and decision-support systems to improve yields and efficiency. It also increased funding for food processing including PMFME and Kisan Sampada Yojana to strengthen value chains from farm to market and reduce post-harvest losses. Although these policy shifts are appreciable, however, they appear somewhat insignificant to augment the income and employment in the rural sector. The sector needs full government support in terms of MSP for a major community of farmers all across the country. Unfortunately, only about 6% of farmers in India, primarily in regions like Punjab and Haryana, benefit from MSP, with the majority of farmers, especially in other states, lacking access to it. Moreover, a massive expansion and infusion of farm-driven technology, including drone and AI-driven farming, crop, and cattle insurance, is genuinely needed in the sector. These measures would immediately augment productivity, add growth, and income to the farmers. This would surely rebound consumer demand, and in the long run will lead to premiumisation and discretionary spending both in rural and urban pockets. Although the consumer spending was somewhat sluggish during the past couple of years (2019-2024), the next generation GST reforms and some macro-economic tailwinds like low inflation and increasing real purchasing power have supported consumer spending.
Similarly, the manufacturing sector is underperforming, its share in GDP has remained almost stagnant at around 15 percent, and in global manufacturing output, around 3 percent during 2025, with low FDI. The competing hubs like Vietnam and ASEAN countries attract more foreign manufacturing investment due to faster logistics, simpler regulations, and better integration. Moreover, the employment growth of the sector is not more than 4 percent in 2025 and is significantly concentrated in a few states. It is still haunted by low technology infusion, infrastructure bottlenecks, complex regulations and policy flaws, and skill deficiencies. However, the policy decisions through the budget proposed novel interventions and emphasized strategic manufacturing industries, including biopharma, semiconductors, electronics components, rare earths, chemicals, textiles, and capital goods, to push domestic production and reduce import dependence. These strategic industries have the potential to raise employment, augment income, and push import substitution. Along with Rs 10,000 crore SME Growth Fund and Self-Reliant India Fund for the support of potent MSMEs and micro enterprises, surely create a niche for the sector to contribute more than in the past. Moreover, to meet the skill demands of the manufacturing sector, the government announced a high powered committee to bridge the gap between education, skill development, and employment, particularly focusing on: 1. Identifying high-growth sectors, including manufacturing, 2. Assessing impacts of emerging technologies (e.g., AI, automation) on workforce needs and 3. Proposing alignment of curricula with industry requirements. The government also earmarked Rs 9,886 crore for workforce training and industry-aligned skill development and Sector-Specific Skilling in Electronic and Semiconductors Ecosystems and textiles. These strategic measures would certainly minimize the skill gaps required by the manufacturing sector.
The service sector in the country is booming and promising robust growth above 55 percent to GDP in 2026-27, at almost 7 percent. The sector is the catalyst for a major global service exporter, attracting the highest FDI, employment generation, and especially skilled employment. Nevertheless, the sector is marred by a deficient skilled workforce, uneven concentration, and infrastructure bottlenecks. Accordingly, the policy approach unleashed by the budget emphasised skill development and digital readiness by adding more AI/tech labs, Atal Tinkering Labs, for improving employability for youth in service sectors like IT, finance, consulting, and digital services. Moreover, the continued focus on Medical Tourism and Heal in India, identification and development of 50 tourist destinations in the hospitality sector, better and convenient credit access with credit guarantee for MSMEs, allowing cent percent FDI in the insurance industry, and easing tax compliance through TDS will benefit the income and employment generation under the sector. Along with these measures, the constitution of the committee on banking for Viksit Bharat to review and align banking sector reforms with India’s next phase of growth, certainly would prove effective for the operational growth of the sector. Further, the additional push under the service sector, given to the Orange Economy, consisting of India’s animation, visual effects, gaming, and comics (AVCG), is the right move. This sector is growing spectacularly and may require 2 million professionals by 2030. For the purposes, the Indian Institute of Creative Technologies, Mumbai, shall be setting up AVCG content creator labs in 15,000 secondary schools all over the country and 500 colleges. These initiatives, if executed on the ground with diligence, would make this sector more robust and a driver for employment growth and the realization of the lofty aims of the nation.
Nonetheless, the above policy changes are proposed when the global business ecosystem is sluggish and geo-political scenario is somewhat fizzy and unsupportive. The uncertain and unfavourable external business environment shocks can disrupt the pace of progress in India and can push fuel inflation, currency value fluctuations, low investment sentiment, export damping, etc., if caution is not exercised at home.
Dr Mehraj ud Din Shah, Associate Professor, Department of Commerce, Central University of Kashmir, Tulmulla, Ganderbal.
