India at a Crossroads: Why the 1991 Growth Model Is No Longer Enough

India’s economy is growing fast — clocking over 8% GDP growth in mid-2025 — and the country has become the world’s fourth-largest economy. Yet beneath these impressive numbers lies a deeper unease. Jobs are scarce, inequality is entrenched, cities are choking, villages are emptying out, and the State is spending ever more on subsistence rather than capability-building. The paradox is stark: high growth, but mounting distress. It raises an unavoidable question — does India now need a new economic model?

What the 1991 model achieved — and what it didn’t

The economic framework put in place after the 1991 crisis delivered undeniable gains. Liberalisation reduced poverty, expanded consumption, and integrated India into the global economy. Growth rates rose well above the “Hindu rate” of earlier decades, and a large middle class emerged.

But history offers a cautionary tale. In the 1980s too, growth had accelerated to over 5%, only to culminate in a balance-of-payments crisis in 1991. India is not facing a similar macroeconomic collapse today. Yet, like then, growth is masking structural weaknesses that are becoming harder to ignore.

The jobs crisis at the heart of the problem

The most visible failure of the current model is employment. India is producing graduates faster than it is producing decent jobs. Thousands of highly qualified candidates routinely apply for a single low-paying position. Even those who are employed often work long hours without earning a living wage.

This disconnect explains one of the most striking contradictions of today’s India: despite strong growth, more than 800 million people receive food subsidies. Instead of shrinking with prosperity, the subsidised population has expanded. As welfare spending rises, fiscal space for long-term investments in health, education and innovation shrinks.

Rural distress and the limits of agriculture-led livelihoods

More than 60% of Indians still live in villages, largely dependent on agriculture, which contributes only about 15–20% of GDP. This imbalance forces the State to rely on subsidies to sustain rural livelihoods.

The human cost is severe. Debt-driven distress continues to claim thousands of lives every year. In States such as Punjab, Haryana and Gujarat, young people sell land and family assets to finance risky migration to the US and Canada, often through illegal routes. Villages hollow out, leaving behind ageing populations — a phenomenon already producing “ghost villages” in parts of the country.

Urbanisation without liveability

Migration to cities has not delivered relief either. India’s urban growth is highly concentrated. The top 10 urban agglomerations house about 10% of the population but generate roughly 25% of output. Future GDP growth will likely come from these same cities — but at a steep cost.

Air and water pollution, housing shortages, congestion, and overstretched civic services are making urban life harsher. Winter smog in Delhi and other cities is now a public health emergency. As production, people and pollution pile into a few metros, growth itself is degrading quality of life.

Knowledge sectors: success, but not leadership

India’s strengths in software and pharmaceuticals show what is possible. During the pandemic, the Serum Institute supplied vaccines to much of the world. Yet the core technologies were imported. India still does not lead in frontier areas such as artificial intelligence, advanced batteries, electric vehicles, gene editing, or next-generation pharmaceuticals.

This gap matters. Countries that dominate such technologies shape global value chains, standards and geopolitics. India participates — but rarely leads.

Global ambition without monetary power

India’s international aspirations sit uneasily with its economic structure. The rupee is far from becoming a global currency. In 2006, the Tarapore Committee laid out a roadmap for capital account convertibility and greater internationalisation of the rupee. The plan was never implemented.

Today, the goal is barely discussed — not because it lacks merit, but because it is nearly unattainable under the existing model, which relies on subsidies, consumption-driven growth, and import-dependent technologies.

Why piecemeal reform won’t work anymore

After 35 years, the limits of the post-1991 model are becoming structural rather than cyclical. Jobless growth, rural stagnation, urban overload, technological dependence and fiscal stress are interconnected outcomes of the same framework.

Tinkering at the margins — adjusting subsidies here, offering incentives there — will not resolve these contradictions. What is required is a rethinking of the development strategy itself: where production happens, what kind of jobs are created, how technology is developed, and how growth is spatially and socially distributed.

The case for a new economic model before 2047

With just over two decades to the centenary of Independence, India faces a strategic choice. A new economic model must deliver high growth while also creating mass employment, revitalising rural India, decongesting cities, and positioning the country at the technological frontier.

Designing such a model cannot be the task of the government alone. Universities, think tanks, industry, and civil society must urgently engage with first principles: what kind of economy India wants to be, and for whom it should work.

The demographic clock is ticking. The question is no longer whether India can grow fast — but whether it can grow in a way that is humane, sustainable, and worthy of its ambitions by 2047.