The great growth illusion

IN CELEBRATING A 'CONSUMPTION BOOM ', INDIA MAY BE UNDERMINING FOUNDATIONS OF A SUSTAINABLE MODEL

- M MUNEER

NDIA'S LATEST GOODS and services tax (GST) cuts arrived with the FM waving a fiscal wand to makewallets open and consumption bloom.The government’s new playbook reads like a cheerful fable: trim taxes, and citizens will splurge, and factories will hum long enough, and GDP will sing.The logic is impeccable—on paper.

Beneath this appealing narrative lies a deeper structural risk. A growth strategy powered primarily by consumption rather than investment, productivity, or exports risks exhausting itself long before Viksit Bharat goals. In its eagerness to celebrate a “consumption boom”, India may be undermining the very foundations of sustainable growth.

Over 60% of India’s GDP already comes from private consumption, compared to less than 40% in China during its high-growth decades. The GST reductions have lowered the tax burden, and the retail data from the festive season has shown a surge in sales, which the government touts as proof that the policy is working. But the critical question is not whether we are buying more, but if we are producing more of what we buy.

The answer, alarmingly, points the otherway. India’s merchandise trade deficit for April-September FY26 exceeded $154 billion, with $54 billion of that imbalance coming from China. This indicates much of the new consumer demand is being met by imports, not domestic manufacturing. In other words, our celebrated consumption boom may be enriching our trading partners rather than our producers.