After Three Decades of Rapid Growth, How Can India Sustain Momentum?

Right now, India is moving up the global economic rankings and will soon overtake Japan in nominal GDP to become the world’s fourth largest economy.

Over three decades of sustained 6%-7% annual growth has transformed India from a half-trillion-dollar economy to a $4 trillion powerhouse.

And it’s not likely to stop there. Projections indicate India will likely overtake Germany to move into third place by the end of the decade.

The So What

“India's trajectory creates significant opportunities for businesses and investors, but capturing them will require new approaches,” says Alpesh Shah, managing director and senior partner who leads BCG’s CEO Advisory in the Asia-Pacific region. “Yesterday's strategies won't deliver tomorrow's results,” he adds, urging a bolder approach to capitalizing on India’s growth.

India’s success comes from multiple drivers. Privatization unleashed a wave of entrepreneurial energy, with the number of billion-dollar businesses multiplying since the 1990s. IT services surged, now exceeding 5% of GDP and earning India its reputation as a global tech capital. Infrastructure investments modernized airports, ports, and road networks.

Over the past decade, Indian capital markets delivered 15.2% average annual returns, outperforming the S&P 500 according to BCG's India Value Creators Report 2025.

Yet the milestone raises a critical question: What does being one of the world’s largest economies mean for 1.4 billion Indians?

With GDP per capita just over $3,000, the reality is complex. Just 5%-10% of India's population enjoys the kind of prosperity seen in the world’s leading economies, including the European Union and the United States. Raising prosperity levels across the board while sustaining momentum is the goal, but there are several challenges.

• Job Creation. The median age of India’s population is 28, and millions are entering the workforce each year. This demographic dividend comes with a risk: if not enough jobs are created, mass unemployment could follow.
• India’s manufacturing sector could prove critical. Manufacturing has declined from 17% to 13% of India’s GDP over the past decade but investment could be a major growth engine for jobs. "When a manufacturing company adds one new job, it indirectly creates 2.2 additional jobs in the economy," Shah explains. "But when a service company adds a job, it creates less than one additional job."
• Transformation of the agriculture sector. Over 60% of Indians depend on farming to make a living, yet average farm sizes remain too small to justify productivity investments. Distribution inefficiencies mean farmers capture only 25% of what consumers pay for their produce, limiting rural income growth despite India's overall economic expansion.

Now What

Success will require partnership and a coordinated approach between companies and governments. These are some of the areas that CEOs can consider as they look to sustain growth.

Think global. India provides a large enough platform to build globally competitive companies, but this requires bolder thinking. CEOs can create a competitive advantage by viewing India as a core market—and the world as a playground to lead at a global level. With multiple sectors now permitting significant foreign investment, domestic companies must be ready to compete with the best, both at home and internationally.

Rediscover manufacturing. By reversing more than a decade of decline in its industrial sector, India can deliver the job-creation multiplier it needs. By targeting manufacturing growth in sectors that combine job potential and manageable automation risk such as precision equipment, specialty chemicals, pharma intermediates, electronics assembly and textiles, India can create expansion without the high levels of capital investment seen elsewhere.

Make AI count. Companies that embed AI into their operating models, and demonstrate returns, will define the next phase of competitive advantage. India has the technical talent but should consider investing more aggressively for the future, treating AI deployment not as experimentation but as a strategic imperative. BCG’s latest research suggests that 90% of CEOs believe AI agents will produce measurable returns in 2026, and half of CEOs believe their job depends on getting AI right.

Prioritize inclusive growth. India's goal to becoming a high-income economy depends on broadening prosperity. This requires making cities more liveable by investing in urban infrastructure, affordable housing, and mass transit that serves the entire population. Bringing more women into the urban workforce can unlock opportunities for both workers and businesses. The World Bank estimates that if female employment and entrepreneurship rates were to match those of men, global GDP could increase by more than 20%. Modernizing farming infrastructure and eliminating inefficiencies in agricultural supply chains will mean hundreds of millions of Indians will see a greater share of their nation’s growing prosperity.

“India’s rise to become one of the world’s leading economies is remarkable but the true measure of success will be how widely that growth is felt by its 1.4 billion people,” Shah says.

"India’s next leap will not just be about ranking higher—but about lifting millions higher with it.”