India’s GDP growth: The latest IMF Article IV consultation offers reassurance. Growth momentum has surprised on the upside. GDP is projected to stay in the 6–7% range, with near-term growth revised higher. Inflation is easing. Foreign exchange reserves remain ample. Fiscal consolidation is broadly on track.
These are not trivial achievements. But they describe outcomes, not mechanisms. The IMF’s own projections reveal a quieter shift beneath the headline stability. India’s growth is increasingly being sustained not by rising domestic savings and productive investment, but by public borrowing and external capital inflows. That distinction matters.
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Falling savings, stagnant investment
The IMF flags a steady erosion in India’s savings rate. From a peak of 32.6% of GDP in 2023–24, savings are projected to slip to just above 30% by the end of the decade. Investment shows little upward momentum, hovering around 32% of GDP.
The arithmetic is straightforward. When investment persistently exceeds domestic savings, the gap must be financed through borrowing or foreign capital. That can support growth for long periods. It also alters its character. Growth becomes dependent on liabilities rather than accumulated domestic capital. India is edging in that direction.
Public debt as a substitute for savings
Fiscal deficits are narrowing, but borrowing continues to play a central role in sustaining demand and investment. The issue is not the debt ratio itself, which the IMF judges as manageable. It is the role debt has come to play.
Corporate savings are concentrated among a small set of large firms. Household savings are under pressure from consumption needs and weak real income growth. Public sector savings remain constrained by welfare commitments and interest costs. Instead of savings financing investment, borrowing increasingly fills the gap.
This is how economies slide into debt dependence without triggering alarm. Debt ceases to supplement domestic savings and begins to replace them.
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Tight money, slower credit
The IMF credits tight monetary policy and fiscal restraint for bringing inflation down from 4.6% to a projected 2.8% in 2025–26. The stabilisation has been effective. It has also tightened credit conditions.
Bank credit growth to the private sector has slowed from 15.5% to 11.8% over three years. Large firms remain funded. Smaller firms do not. When domestic credit growth weakens, investment shifts towards government-led spending, foreign borrowing, or equity inflows.
Stability has been secured. The growth model has become more debt-anchored in the process.
Financial resilience is a buffer, not a solution
The IMF notes that banks are well capitalised and non-performing assets remain low. This financial resilience matters. It reduces the risk of an abrupt credit shock.
But resilience should not be confused with dynamism. Strong balance sheets protect the system from stress. They do not, by themselves, revive domestic savings or broaden private investment. The buffer buys time. It does not change the direction of travel.
Foreign capital filling domestic gaps
The IMF projects a sharp rise in foreign inflows. FDI is expected to increase from $10.1 billion to $76 billion by 2030–31. Portfolio flows are projected to multiply.
These inflows signal confidence. They also compensate for weak domestic capital formation. Foreign capital is stepping in because domestic savings are not rising fast enough to support higher investment.
Unless these inflows translate into deeper manufacturing capacity, technology diffusion, and export competitiveness, they risk becoming financial scaffolding rather than productive engines. Capital enters. Capabilities do not automatically follow.
External accounts: Cushion and constraint
The IMF projects a widening trade imbalance. Merchandise exports weaken while imports rise faster, pushing the current account deficit towards $123 billion, or 1.9% of GDP, by 2030–31.
Services exports and remittances soften the blow. They have done so repeatedly. But they do not eliminate the underlying pattern. India continues to consume more than it produces in goods, financing the gap through capital inflows and borrowing.
That is not a crisis signal. It is a structural vulnerability.
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Numbers, and their limits
One final caveat deserves mention. The IMF itself flags limitations in India’s macro data quality. Savings, investment, and output ratios are estimates, not certainties. But imprecision cuts both ways. It weakens complacency as much as alarmism.
When the direction of change is consistent across indicators, data uncertainty does not negate the trend.
India’s GDP growth: Stability without transformation
India is not facing a debt crisis. The IMF’s tone remains calm because the numbers, taken individually, look comfortable. The concern lies in how those numbers fit together.
An economy increasingly reliant on borrowing and foreign inflows, while domestic savings weaken, is living on borrowed resilience. Stability, in such a setting, buys time. It does not guarantee transformation.
That time must be used to rebuild household savings, broaden private investment, deepen domestic credit, and strengthen export capacity. Otherwise, macro stability risks becoming a cushion for complacency rather than a foundation for durable growth.
Dr Shivani Giri is Assistant professor while Diya Gupta and Nandini Singhal are students at Christ University, NCR Campus