India’s economy appears calm on the surface: equity indices hover near record levels, malls are crowded, vehicle sales are improving and premium housing continues to find buyers. But beneath this confidence lies a set of structural pressures that could challenge the durability of the growth story in the coming years, according to veteran financial journalist Debashish Basu.
Writing in Business Standard, Basu warns that India is facing a convergence of five powerful headwinds that are rarely discussed together: high public debt, slowing revenue growth, falling household savings, worsening geopolitics and the growing pull of populist politics. Managed individually in the past, these forces now threaten to reinforce each other.
The most immediate concern is government debt, he points out. India’s combined central and state debt exceeds 80 percent of GDP, according to IMF estimates. While the Union finance ministry has reiterated its commitment to lowering the debt-to-GDP ratio, the room for manoeuvre is limited. Basu points out that fixed commitments — salaries, pensions, interest payments and welfare spending — absorb more than four-fifths of government revenues. Cutting capital expenditure may reduce borrowing, but it also risks slowing growth, as public capex has been the key economic driver over the past three years.
The second pressure point is slowing revenue momentum. Goods and Services Tax collections continue to grow, but much of the increase is driven by inflation, compliance tightening and a narrow set of sectors. Underlying consumption growth remains uneven, especially in mass-market segments. As Basu notes, when revenue growth weakens while expenditure remains politically sticky, fiscal consolidation becomes increasingly difficult.
A third and more worrying signal comes from household savings. Financial savings have fallen sharply in recent years, reflecting weak real wage growth and job insecurity. This shift limits the scope for a broad-based consumption recovery. High-end spending may look healthy, but without rising savings and incomes at the bottom and middle of the pyramid, demand-led growth will struggle to sustain itself.
External risks add another layer of uncertainty. Geopolitical tensions, trade protectionism and tariff threats are reshaping global commerce. While India hopes to benefit from supply chain diversification, Basu cautions against excessive optimism. Export growth remains vulnerable to global slowdowns, and free trade agreements alone cannot offset geopolitical shocks.
Finally, there is the political response. History shows that, Basu argues, slowing growth often leads to populist policies — loan waivers, subsidies, cheap credit and expanded public hiring. These measures may deliver short-term relief but complicate long-term fiscal discipline. Basu argues that populism, when layered on top of high debt and weak revenues, risks locking the economy into a low-efficiency equilibrium.
India is not in crisis. But the comfort created by buoyant markets and headline growth numbers may be masking deeper stresses. As Basu’s analysis suggests, the challenge lies not in any single headwind, but in how these five forces interact — quietly testing the resilience of India’s growth model.
