Why India is Outpacing China, US, EU, and Germany in Economic Growth
India’s Steady Growth in a Faltering World
India’s economic growth is expected to remain steady at 6.3% in FY26, despite the global economy facing headwinds, according to the World Bank’s latest estimates. This growth rate makes India the fastest-growing major economy, outpacing China, the US, the European Union, and Germany.
A Decade of Outperformance
India first emerged as the world’s fastest-growing major economy in 2015, surpassing China in terms of GDP growth rate. The convergence of a favorable external environment, domestic macroeconomic stabilization, and a bold reform agenda laid the foundation for India’s economic acceleration. Key reforms during this period included the Make in India initiative, liberalization of FDI norms, and steps toward fiscal consolidation.
Reasons Behind India’s Outperformance
India’s growth is driven by both cyclical and structural factors. Unlike export-reliant economies, India benefits from a consumption-heavy GDP structure. A growing middle class, rising urbanization, and increasing per capita income create a resilient consumer base that cushions the economy from global shocks.
- A growing middle class and rising urbanization
- Increasing per capita income
- Government-led capital expenditure in infrastructure
- Reforms such as the GST, Insolvency and Bankruptcy Code, and digital public infrastructure
Challenges and Risks
Despite optimism, India is not immune to global turbulence. Key risks include dependence on oil imports, a relatively weak export sector, and fiscal pressures. However, India’s IT and digital services exports continue to surge, and the country is increasingly positioning itself as a global back office for advanced services.
Global Economic Context
The global economy is expected to expand by just 2.3% in 2025, a deceleration from previous expectations. This subdued pace underscores the persistence of several cross-cutting headwinds, including rising protectionism, demographic aging, and productivity stagnation.
Future Prospects
India’s growth momentum is expected to continue, driven by favorable demographics, domestic demand, and policy momentum. However, whether this momentum translates into sustained long-term convergence with advanced economies will depend on India’s ability to broaden the benefits of growth, invest in human capital, and build resilience against future global shocks.
As the world navigates a low-growth equilibrium, India’s economy stands out as a beacon of stability and growth. With a median age of 29, India’s labor force continues to expand, driving both demand and productivity gains. Government-led capital expenditure, especially in infrastructure, has a strong multiplier effect, crowding in private sector investment, particularly in manufacturing and logistics.
