The global landscape is filled with uncertainty due to various geopolitical issues. The ongoing Russia-Ukraine conflict has impacted energy markets, while tensions in Gaza affect stability in West Asia. In South Asia, political and economic challenges in Nepal add to regional instability. These factors play a crucial role in shaping India’s foreign policy and energy security.
Despite these challenges, India’s economy is showing strength. In July 2025, retail inflation stood at a low 1.55%, allowing room for growth if global risks increase. The country’s GDP grew by 7.8% in the first quarter of 2025-26, showcasing strong activity in manufacturing and services. The Purchasing Managers’ Index (PMI), which gauges business sentiment, reached its highest level in over a decade. In August, the manufacturing PMI hit 58.8, and the services PMI climbed to 62.9.
This resilience is drawing international attention. Fitch Ratings has upgraded India’s growth forecast to 6.9% for 2025, while Morgan Stanley predicts growth around 7% in the medium term. The International Monetary Fund (IMF) has also raised its estimate to 6.4%. These figures suggest that India is not just surviving but thriving amidst global turbulence.
However, India’s export sectors such as textiles, gems, and chemicals are still at risk from global disruptions. Even before tariffs or policies are enforced, uncertainty can cause businesses to hesitate. Smaller companies, often involved in these sectors, might delay investments or even exit markets. With many of these businesses being small and medium enterprises (SMEs), the impact on jobs and local economies can be significant. Anticipated global trade disruptions can erode confidence long before any formal changes are made.
One aspect that differentiates India is its growth structure. Private consumption accounts for over 60% of GDP, providing a buffer against external shocks. In fact, the share of private consumption in nominal GDP increased from 60.2% in FY24 to 61.4% in FY25—the highest in two decades. This rise indicates a healthy growth in consumer spending, which rose by 7.2% in FY25 compared to 5.6% the previous year.
India’s involvement in the Shanghai Cooperation Organisation (SCO) presents opportunities to strengthen trade with Russia, China, and other member nations. Building these connections can enhance India’s influence in a changing global economy. At the same time, it’s vital for India to diversify its trade relationships, embracing partnerships with both developing and developed nations, as seen in agreements like the India-UK trade deal.
Balancing these dynamics is critical for India. While global uncertainties threaten exports, the country’s robust domestic demand creates some leeway for policymakers. Reforms such as the Goods and Services Tax (GST) aim to boost domestic consumption. Still, international uncertainties can impact profit margins, particularly in labor-heavy industries like textiles. Targeted reforms, combined with a strong local market, can stabilize these sectors, safeguard jobs, and contribute to India’s goal of becoming a developed nation.
In short, India is navigating a complex path, balancing the demands of global uncertainty with its internal strengths. With the right moves, it can emerge not just intact, but invigorated.
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Indian Economy, GST, economic rationality, rationalisation, liberal market, GST
