The Truth Behind India's Economic Report Card

At the beginning of 2025, India released a striking set of economic data: GDP growth is expected to reach 7.1%, claiming to have surpassed Japan to become the world's fourth-largest economy, and even predicting it will climb into the top three within two years. These figures sound impressive, but a closer look reveals a significant amount of embellishment.

**The Huge Gap Between Data and Reality**

India's claimed 7.1% growth rate is severely disconnected from the actual performance of its real economy. Economic growth typically relies on three core drivers: consumption, production, and infrastructure. However, India's performance in these three areas cannot support the high growth rate it proclaims.

From the consumption side, Indian household consumption contributes only 2.1% to GDP growth, compared to 3.5% in other contexts, directly reflecting the weak purchasing power and consumption willingness of Indian consumers. The data on production shows an even more obvious discrepancy: India's industrial added value growth is only 3.2%, far below the 5.1% figure, and as industry forms the backbone of the real economy, this sluggish growth directly indicates the current state of production activities.

What is more telling are the so-called "hard indicators"—freight volume and power generation—which are both significantly lagging. These two indicators rarely lie because they directly reflect economic activity. Without solid industrial support, high growth based solely on statistical manipulation is highly questionable.

**Internal Issues in Industry Structure**

India's economic structure exposes deeper problems. The manufacturing sector accounts for only 14.42% of GDP, far below the government's target of 25%. The so-called high economic growth is actually more driven by the finance, real estate, and public administration service sectors. This "virtual" growth model lacks sustainability and confirms the inflated nature of the GDP data. Former Reserve Bank of India Governor Raghuram Rajan publicly stated that India's economic data "are incomprehensible and unreliable."

**The Demographic Dividend Is Rapidly Fading**

For a long time, the demographic dividend was seen as India's core competitive advantage for economic growth. But this advantage is rapidly diminishing. Data shows that India's total fertility rate in 2024 has fallen to 2.0, below the replacement level of 2.1, and is likely to decline further in 2025. This means natural population growth will gradually slow down.

This change is not accidental. Urbanization, industrial transformation, and the proliferation of mobile internet have all played roles as "contraceptive tools." Rising urban living costs, changing female employment attitudes, and improved education levels continue to suppress fertility intentions.

India's previous advantage was its large youth population—out of 1.4 billion people, a very high proportion were young, with an average age of only 28. But the rapid decline in fertility rates will directly impact future labor supply. More critically, currently, 40% of India's workforce is still engaged in agriculture, with female employment at only 30%, and uneven distribution of educational resources makes it difficult to convert large labor forces into effective human capital. The demographic dividend window is closing, and the growth model based on population size is facing difficulties.

**Undeniable Potential in the Industrial Chain**

Despite the inflated GDP figures, India's strategic potential is worth serious attention. With a huge population base, India demonstrates remarkable capacity in supplying high-end talent. The annual output of engineers and AI specialists ranks second in the world, with India accounting for 7.0% of the global AI talent pool, second only to China and the US. Top graduates from Indian Institutes of Technology (IITs) hold important positions in Silicon Valley and the global tech industry, and the continuous rise in the Nature Index also confirms the enhancement of its scientific research strength.

**Mobile Industry Chain: A Key Breakthrough in Manufacturing**

India's biggest strategic confidence comes from its mobile industry chain layout. Through a series of policy incentives, India has become the second-largest mobile phone manufacturer globally and the largest supplier to the US. The seemingly simple assembly of mobile phones is actually a crucial step in upgrading manufacturing. Being able to organize mobile phone production can lead to home appliance manufacturing, and producing home appliances can extend to assembling automobiles—these three industries are connected through a gradually decreasing complexity requirement, forming a natural extension from high to low.

This industrial logic is gradually being realized in India. The large-scale development of mobile, home appliance, and automobile industries will generate strong industrial linkage effects. This will boost demand for steel, electricity, and other basic industries. The widespread adoption of automobiles will also push infrastructure development like roads, further stimulating the expansion of cement and other building materials industries.

Currently, India's mobile industry mainly relies on importing components for assembly, but with the rise of domestic giants like Tata and deeper overseas technological cooperation, Indian manufacturing is expected to gradually extend upstream and downstream, forming a complete industrial ecosystem.

**Conclusion**

India's GDP data indeed has water content, no doubt about it. But its enormous domestic market and ongoing policy support will still sustain a certain level of growth. The shift of the mobile industry chain is an important variable in the global manufacturing landscape, and India is gradually becoming a key part of the global industrial chain thanks to its market potential.

India may find it difficult to replicate China's growth miracle, but its own talent and market advantages will create a competitive edge, making it an increasingly important player in the global economy.