Big growth, small governance

In global growth rankings, India continues to stand tall. With GDP expected to expand between 6.3 and 7.2 per cent in 2024–25 — according to forecasts from the IMF, the Reserve Bank of India and the National Statistical Office — the country remains one of the world’s fastest-growing major economies. The government’s macroeconomic management, ranging from fiscal prudence to a strong digital infrastructure push, has earned recognition from investors and multilateral institutions alike. Global companies are increasingly looking to India as part of their supply chain diversification, while the narrative of a confident “New India” continues to define both political and corporate discourse.

Yet beneath this optimism lies a quieter, more complex reality. Rapid growth coexists with uneven job creation, gaps in service delivery, and a public sector still adapting to the demands of a fast-changing economy. The contrast is stark: a country that placed Chandrayaan-3 on the lunar south pole in 2023 still struggles to ensure clean water, reliable transport, and sufficient employment opportunities for millions. India’s challenge today is not one of vision, but of execution — ensuring that its governance systems can match the scale and ambition of its economic transformation.

The macroeconomic picture remains encouraging. India has outperformed most emerging peers, inflation has stayed relatively moderate, and foreign direct investment has held steady despite global uncertainty. Major initiatives — including Gati Shakti, Digital India, and the Production-Linked Incentive (PLI) schemes — have catalysed infrastructure expansion and manufacturing growth.

Still, the lived experience of many citizens tells a more mixed story. Urban unemployment, especially among the educated youth, remains a concern. The Periodic Labour Force Survey (2023–24) reported an overall unemployment rate of about 4.9 per cent, with youth unemployment (ages 15–29) around 10.2 per cent. Independent data sources such as the Centre for Monitoring Indian Economy (CMIE) suggest higher figures, particularly in cities.

India’s labour market also remains largely informal — between 80 and 90 per cent of workers lack formal contracts or social protection. Similarly, public spending on health and education, while improving, remains modest relative to the country’s needs. Health expenditure stands at about 3 to 3.5 per cent of GDP, and education around 4 to 4.6 per cent. Urban municipal systems, managing a third of India’s population, often operate with limited financial and administrative autonomy — constraining their ability to meet rising expectations.

Even as Goods and Services Tax (GST) collections touched a record `22.08 lakh crore in 2024–25, the “ease of living” for citizens has not always kept pace with the “ease of doing business” for investors. This growing divergence highlights the need for deeper governance reform — not only in policy design but in day-to-day delivery.

India does not lack for ideas or ambition. On paper, its reform agenda is modern and far-reaching — from labour codes and PLI incentives to digital welfare systems. The challenge lies in consistent, on-the-ground execution.

Take the Smart Cities Mission: envisioned as a citizen-centric initiative, it has produced some notable projects but also revealed weaknesses in community engagement and coordination. Similarly, Skill India has trained millions, but job placements remain limited as training content often trails market demand. Even flagship social programmes such as Pradhan Mantri Awas Yojana (housing) and MGNREGA (rural employment) face operational hurdles — land disputes, payment delays, and uneven monitoring.

These are not failures of intent, but symptoms of institutional design. India’s administrative culture, historically focused on compliance and control, sometimes struggles to adapt to performance-driven governance. Accountability tends to taper off after policy announcement; what is needed now is accountability for outcomes.

Recent years have rightly seen greater emphasis on transparency, audit, and anti-corruption vigilance. However, this has also led at times to a culture of excessive caution. Civil servants, wary of procedural scrutiny, may err on the side of inaction. This dynamic — often described as “policy paralysis by caution” — can slow approvals and dilute implementation.

To sustain growth, India’s governance system must balance integrity with initiative. Strong oversight should coexist with an environment that rewards responsible risk-taking, innovation, and problem-solving.

India has shown that digital tools can transform delivery. The success of the Goods and Services Tax Network (GSTN) and Direct Benefit Transfers (DBT) shows how technology and transparency can reduce leakages and improve efficiency. Similar data-driven systems could enhance accountability in infrastructure, welfare, and urban development.

Equally important is true decentralisation. The 73rd and 74th Constitutional Amendments envisioned empowered local governments, but most states are yet to transfer adequate funds and functions. Strengthening panchayats and municipalities with skilled personnel, financial resources, and decision-making authority can make governance more responsive and adaptive. The Indian Administrative Service and allied cadres remain central to the country’s governance machinery. Yet their roles must evolve from regulation to results. Performance-based reviews, lateral entry, and domain specialisation can bring both agility and expertise. A culture that recognises and rewards delivery — not just compliance — is essential to modern governance.

Ultimately, effective governance rests on trust — between the state, citizens, businesses, and civil society. India’s developmental challenges, from climate adaptation to urban mobility, demand collaboration across these spheres. Transparency should be seen not as a threat but as an enabler: open data, participatory audits, and citizen feedback loops can make government more accountable and trusted. The story of “New India” is compelling, but it must be underpinned by robust institutions and inclusive governance. Economic growth without institutional depth is difficult to sustain. A trillion-dollar infrastructure pipeline is valuable only if projects are completed efficiently; a buoyant stock market cannot compensate for jobless growth.

India’s demographic dividend, digital capability, and global standing are powerful assets. The next leap forward will depend not just on how fast the economy grows, but on how effectively it is governed. The country’s challenge, therefore, is not between big government and small government — but between effective government and weak government.

Economic dynamism has given India momentum. Sound governance must now give it direction.