Choose your economic model

In the post-World War II era, two forces have driven economic development more than any other: real estate and exports. Together, they have transported most economies from underdeveloped to middle-income status over eight decades. Technology and productivity gains have played a critical but largely supporting role — improving export competitiveness and raising household affordability for property ownership.

Improvements in social outcomes — inclusiveness, sustainability, equity, and quality of life — have typically followed economic development with a lag, sometimes by decades. It is therefore reasonable to assess any country’s economic model against these two pillars: how well it has built exports, and how well it has developed real estate.

India’s experience on both counts is instructive — and incomplete.

Exports: A story that stalled

As India opened up its economy in 1991, exports began to rise noticeably. Growth then accelerated sharply from around 2004. Much of that momentum can be traced to the structural reforms of the NDA government under Atal Bihari Vajpayee (1998–2004) — aggressive privatization of core sectors, rapid build-out of industrial and trade infrastructure, and the development of engineering and technology capabilities, partly driven by the necessity of surviving international sanctions after the 1998 nuclear tests. Those compulsions produced competencies that later translated into genuine export strength in engineering, technology, and pharmaceuticals.

But after the Global Financial Crisis of 2008–09, the story changed. Exports stagnated. More telling, India’s exports as a share of GDP peaked around 2013–14 at roughly 25% and have been declining since. A sharp post-Covid recovery briefly arrested that trend, but the past three years suggest a resumption of the downward drift.

 

(These figures include merchandise exports, services exports, royalties, and technical fees.)

The structural issues are well known: weak manufacturing competitiveness, logistics gaps, a modest share of global value chains, and a services export base that is deep but narrow. None of these are easy to fix. But the data makes clear that post-GFC India has not been able to sustain the export-led momentum that most successful Asian economies relied upon.

Real Estate: Underdeveloped and under pressure

Granular data on real estate’s direct contribution to India’s GDP is not readily available. The broader category of “Financial Services, Real Estate and Professional Services” under the services classification shows that this group’s share of GDP rose from around 15% in the early 1990s to approximately 22–24% today — a significant structural shift.

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Much of that gain likely reflects financial services rather than real estate itself. A May 2026 KPMG report estimated real estate’s direct contribution to India’s GDP at approximately 7.3%. By comparison, most Asian economies see real estate contributing 13–15% of GDP — a gap that reflects how far India’s urbanization and housing development still have to go.

The enabling conditions for a strong real estate cycle have been present to varying degrees. Since 1991, average lending rates have fallen sharply — from nearly 19% at their 1992 peak to around 9% today — driven by sustained fiscal consolidation, better inflation management, and structural improvements in the current account. Lower rates, combined with rising employment, improving real wages, better connectivity, and expanded urban access, supported a strong real estate growth cycle through the 2000s and early 2010s.

That cycle has since lost momentum. Inflation has proved sticky, the current account remains structurally vulnerable, and real wage growth in the formal economy has slowed. Interest rates, while well below their historical highs, have stopped falling. Without a resumption of the structural improvements that drove the last cycle, the tailwinds for real estate are weaker than they were.​

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 The central question

This brings us to the harder question. If both pillars of the conventional post-war growth model — exports and real estate — are underperforming, what does India do?

One option is to double down: fix the structural constraints on exports, accelerate urbanization, and build the financial depth needed to sustain a larger real estate cycle. This is the well-tested Asian playbook.

The other option is harder to define but not trivial to dismiss. As I argued in a 2014 post on this blog (see Utopia: The Economic Solution), the Gandhian model — grounded in decentralization, labor-intensive production, self-reliance, and the primacy of the individual over capital — has attracted serious academic attention and is not without practical merit. The question is whether India has already travelled too far down the urbanization and integration path to reverse course, or whether elements of that framework can be selectively incorporated into a hybrid model.

Borrowing blindly from western models will not work in the Indian context. India’s economic model needs to reckon with a class structure, an employment challenge, and a rural civilizational inheritance that standard industrialization narratives do not address well. At the same time, a pure retreat to pre-industrial self-sufficiency is not a realistic option for a country of 1.4 billion people with legitimate aspirations.

The answer is likely somewhere in the middle — a model that aggressively rebuilds export competitiveness and develops real estate as a genuine engine of growth, while orienting its social architecture around decentralization, broad-based employment, and sustainability rather than pure GDP maximization.

The policy choice ahead

The data from the three charts above does not make a comfortable reading. Exports as a share of GDP have been falling for over a decade. Real estate is significantly undersized relative to India’s peers. Lending rates, while structurally lower than in the past, are not falling anymore. These are not cyclical problems. They are structural.

Policymakers cannot afford to wait for the globally tested model to reassert itself on its own. A deliberate choice needs to be made — either recommit to the conventional model with genuine policy urgency, or develop a credible alternative suited to India’s specific conditions. Muddling through, which has been the default, is not a strategy.

What that alternative looks like is a conversation India has not yet had at the level of seriousness it deserves.

Also read – Utopia: The economic Solution