India’s growth resilience faces energy & capital flow pressures: S&P
India needs to revive private investment, strengthen infrastructure and address energy and financial bottlenecks to turn its macroeconomic resilience into sustained growth, according to India Forward: Reimagining Growth, a report by S&P Global and Crisil.
India would need annual GDP growth of roughly 7.8 per cent to achieve its ambition of becoming a developed economy by 2047, said the report authored by Deepa Kumar, Gauri Jauhar and Atul Arya.
India needs to revive private investment, strengthen infrastructure and address energy and financial bottlenecks to sustain growth, according to S&P Global and Crisil. Their report estimated that achieving developed-economy status by 2047 required annual GDP growth of roughly 7.8 per cent. Despite strong economic buffers, higher oil prices and rainfall shortfalls posed challenges to growth.
India’s economy expanded by 7.7 per cent in fiscal 2025-26, exceeding analysts’ consensus by more than 100 basis points despite high tariffs and a challenging global environment. However, deeper integration with global trade, capital markets and energy flows had increased its exposure to external shocks, the report noted.
The country entered fiscal 2026-27 with several buffers. Foreign exchange reserves covered more than nine months of imports, commercial banks’ gross non-performing asset ratio stood at a decade-low 1.8 per cent, and central foodgrain stocks reached 92.6 million tonnes. Crisil’s credit rating upgrade-to-downgrade ratio was 1.50 times.
These strengths faced pressure from higher crude oil prices linked to the Middle East war and rainfall that was 14 per cent below the long-term average through late August. Foreign capital flows also presented challenges. Net foreign portfolio inflows declined by 16.6 per cent in fiscal 2025-26, while gross foreign direct investment of $94.5 billion translated into net inflows of just $7.8 billion following outward investment and repatriation.
The report said India needed to raise total investment from 32 per cent of GDP by encouraging private capital expenditure. Semiconductors, electric vehicles and defence were expected to attract 25–27 per cent of industrial investment over the next five years, compared with 12 per cent in the preceding five years.
Energy security and reliable electricity supply would be central to sustaining industrial expansion. S&P Global Energy forecast annual electricity demand growth of 5.56 per cent, compared with 2.47 per cent for overall energy demand. Electricity was expected to account for nearly a quarter of the national energy basket by 2035, requiring additions of 300 GW of solar photovoltaic capacity and 95 GW of storage.
Grid constraints remained a concern. Transmission bottlenecks stranded more than 6 terawatt-hours of solar generation during April–June 2026, while grid inflexibility led to 3,300 gigawatt-hours of renewable energy curtailment in early 2026.
The report called for an integrated storage strategy linking petroleum reserves with battery and pumped-hydro storage, alongside efforts to avoid fresh dependence on imported clean-technology components.
Deeper capital markets, stronger financial intermediation and digital currency applications could improve capital efficiency and reduce transaction costs. Competitive state-level policies and coordinated infrastructure development would also be crucial to addressing structural and logistical constraints, added the report.