India at 8%: Five Reforms Needed to Turn a Good Year into Two Decades of Growth

For the first half of the year, India has grown at an impressive 8 per cent, confounding expectations amid global trade volatility and tariff uncertainty. Exports surged nearly 20 per cent in November, even as many economies struggled. With reforms in the Goods and Services Tax, the rollback of several quality control orders, committee-led deregulation efforts, and the long-delayed implementation of labour codes, India’s potential growth rate is clearly rising. Parliament is now debating private participation in nuclear energy and 100 per cent foreign direct investment in insurance — further signals that the reform agenda retains momentum.

The challenge, however, is not to celebrate an 8 per cent year. It is to replicate it — year after year — for the next two decades. Only a handful of economies, such as Japan, South Korea, Singapore and China, have achieved such sustained growth. India now has the macroeconomic stability, digital public infrastructure and institutional depth to attempt this leap. What it needs is focused execution across five reform frontiers.

Why sustaining 8 per cent growth matters

India’s demographic window will not remain open indefinitely. To escape the middle-income trap and reach high-income status by 2047, growth must remain consistently high, not episodic. Short bursts are insufficient. Sustained growth requires raising productivity, lowering transaction costs, deepening markets and enabling scale — particularly in cities and manufacturing. The current reform cycle has laid the groundwork; the next phase must convert potential into permanence.

Fixing cities: Municipal reform as a growth multiplier

Urban India is now the backbone of services exports, Global Capability Centres and innovation-led growth. Yet cities remain clogged with pollution, waste and governance failures. Productivity losses from congestion, poor air quality and unreliable infrastructure are mounting.

The Urban Challenge Fund announced in last year’s Budget — estimated at around ₹1 trillion — must be operationalised urgently. Climate risk should be embedded into city planning, with clean mobility, efficient buildings and resilient infrastructure treated as economic necessities, not environmental add-ons. Circular economy solutions for water and waste management will improve both sustainability and public health. Well-governed cities do not just absorb growth — they multiply it.

Manufacturing depth and the clean-tech opportunity

To move from assembly to value creation, India must build depth in manufacturing. The Clean Tech Manufacturing Mission and the National Manufacturing Mission announced in the Budget need rapid operationalisation. Technologies such as semiconductors, solar photovoltaics, batteries, electrolysers and critical minerals are no longer niche sectors — they sit at the heart of global industrial competition and geopolitics.

India’s continued dependence on imports for many of these components exposes it to supply-chain disruptions and strategic vulnerability. Betting big on green and digital manufacturing is therefore both an economic and strategic imperative. This must be supported by sustained infrastructure investment, blended finance, de-risking tools and modern public–private partnership models to crowd in private capital.

Lowering trade barriers to raise export competitiveness

India’s manufacturing ambitions depend on a simple truth: competitive exports require efficient imports. Customs reform — faster clearances, risk-based inspections and trust-based compliance — is critical to lowering trade costs. Reducing friction at the border can deliver productivity gains comparable to major tax reforms.

Trade liberalisation also requires speed on free trade agreements. While protecting red lines in agriculture and sensitive sectors, India must accelerate FTA negotiations to secure market access at scale. Manufacturing ecosystems thrive when firms are assured access to large, predictable markets. Trade policy must be viewed less as defensive armour and more as an instrument of growth.

From grants to missions: Rethinking innovation policy

India’s innovation ecosystem remains skewed toward fragmented grants rather than mission-driven outcomes. A bold reorientation is needed. A national programme offering $1 million grants to 500 academics from leading global universities could attract top-tier research talent. In parallel, sabbatical fellowships for 1,000 academics — supported by $100,000 grants with top-ups — would accelerate knowledge transfer.

Commercial innovation remains a weak link due to limited industry–academia collaboration. Models such as the Warwick Manufacturing Group at the University of Warwick demonstrate how industrial research, education and SME support can coexist. Similar centres should be established across India’s Institutes of Eminence. Crucially, the government must act as a buyer of technology, issuing grand challenges — from sewage-free cities and real-time water monitoring to indigenous batteries and precision digital tools for farmers — to scale innovation across the Global South.

Lowering the cost of capital to unlock investment

India’s average cost of capital remains 400–600 basis points higher than in other major economies. This dampens investment and slows scale-up. Fiscal consolidation is central to addressing this gap. When governments absorb a large share of domestic savings, capital becomes scarcer and more expensive for the private sector.

Institutional mandates amplify this effect. The statutory liquidity ratio, for instance, requires banks to hold a significant share of assets in government securities, with similar obligations imposed on insurers. A phased rollback of such requirements would free up capital and reduce borrowing costs. Simultaneously, deepening corporate bond markets would allow firms to rely less on bank credit and more on market-based finance.

Execution, not intent, is the binding constraint

India’s foundations are stronger than ever: macroeconomic stability anchored by the Reserve Bank of India, a world-class digital public infrastructure, and a renewed reform push. But history shows that sustained high growth is less about vision than about relentless execution.

If India is to sustain 8 per cent-plus growth for the next two decades, reforms must move faster than comfort allows. Municipal governance, manufacturing depth, open trade, mission-led innovation and cheaper capital are not separate agendas — they are interlocking pieces of the same growth puzzle. Matching the boldness of ambition with speed and coherence of execution will determine whether this year’s surprise becomes India’s long-term norm.