Analysts expect next year’s (2025-26) GDP growth to be in the ballpark of 6.5%. This is pretty much in line with India’s potential growth rate. Of course, there are contingencies such as a normal monsoon and downsides such as the ongoing US-triggered volatility in the global economy, both real and financial.

Predictions and revisions aside, what’s the larger policy takeaway from the GDP numbers?

Private consumption seems to have done well which suggests some sort of demand recovery. This is in keeping with initial evidence of a qualitative recovery in the labour markets too. Whether this will sustain and become broad based enough to boost the capex cycle is the most important question going forward — especially because the government push to investment seems to have peaked out at the Centre and is likely being crowded out by populist revenue spending at the level of states. The revision in tax slabs which is expected to add a lakh crore rupees to disposable incomes should help here. To be sure, some of the sentiment and income boost from tax slabs changes could end up being neutralised by the ongoing bear phase in the equity markets which have seen a remarkable rise in participation from middle classes in the recent past. Then there is the concern about external volatility pitting constraints on RBI’s appetite for monetary easing, which, given the sharp slowdown in growth between 2023-24 and 2024-25 appears more justifiable (and needed) than before.

What does one make of the overall situation? India has done well so far. Now, economic policy must preserve the relative comfort of the country being the world’s fastest growing major economy and boost future growth. It will take reforms, focused bilateral trade deals (exports are absolutely essential to take us to a sustained high growth path), and synchronised policy interventions by the fiscal and monetary arms to achieve this. India has done well on the last under this government. It is time to ace the other two now.