Blitz Bureau
NEW DELHI: There is a seductive danger in milestones. As India wakes to 2026 as the world’s fourth-largest economy — having finally nudged past Japan with a GDP of $4.18 trillion — the temptation to coast on momentum is intoxicating.
The Government’s economic managers have arguably delivered a “Goldilocks” scenario: growth at 6.6 per cent and inflation tamed below 4 per cent. But as New Delhi eyes the $4.5 trillion German economy and the third spot on the global podium, we must confront a stark, uncomfortable truth: what got us here will not get us there.
The ascent from fifth to fourth place was fuelled by efficiency. It was built on the back of digitisation, tax rationalisation, and a massive, state-led infrastructure blitz. These were the reforms of the determined.
The climb to the third spot, however, requires reforms of the difficult. It demands scaling a sheer cliff face by touching the “political third rail” of Indian economics: factor market reform.
For too long, the heavy lifting of capital expenditure has been borne almost exclusively by the taxpayer. The Government’s balance sheet has built the highways, the airports, and the power grids. But a $5 trillion economy cannot rest on public spending alone.
The private sector must take the baton. Currently, private investment hovers near 33.5 per cen% of GDP — falling short of the requisite 40 per cent flagged by the World Bank. This is not merely a dry statistic; it is a silent vote of no confidence in our regulatory environment.
Captains of industry are eager to build data centers, yet they hesitate to break ground on factories that employ thousands. They are voting with their capex, signalling that the risk-reward ratio for mass manufacturing remains skewed.
Unlocking this capital demands that the 2026 Budget initiate a “hard reset.” The four Labour Codes, passed by Parliament years ago but languishing in a state-level limbo, must be implemented.
We cannot aspire to unseat China as the “factory of the world” while retaining 20th century labour laws that penalise scale. If Vietnam can offer flexibility combined with social security, India has no excuse to lag. Equally critical is the litigious quagmire of land acquisition, which continues to stall mega-projects; 2026 demands a federal push to digitise and simplify land titling to drastically lower the cost of doing business.
Externally, trade requires a ruthless pragmatism. With the United States raising tariff walls in late 2025, the era of easy exports has ended. We can no longer afford the luxury of protectionism disguised as self-reliance. The path to overtaking Germany lies in aggressively integrating into global value chains, not insulating ourselves from them.
We must graduate from being an “assembly economy” — where value addition in smartphones is an anaemic 18 per cent — to a genuine manufacturing powerhouse where components are forged on Indian soil.
While the IMF hails India as a “bright spot,” global markets remain unsentimental. They punish complacency. We are currently witnessing a “K-shaped” investment cycle —booming in high-tech services but sputtering in mass manufacturing.
If we do not address this structural imbalance in 2026, we risk sliding into the “middle-income trap,” where growth stagnates before high-income status is reached. The window of our “demographic dividend” is narrowing; if we do not employ our youth now, this dividend will curdle into a liability.
Celebrating the fourth spot is the privilege of the citizen; securing the third is the burden of the state. The party is over. It is time to get back to work.