Do it yourself

 India’s external debt hit US$736.3bn by March 2025, a 10% jump from last year, with a significant portion (over 41%) of the debt maturing soon. As the US threatens 500% tariffs on countries buying Russian oil, including India, investors need to evaluate: Can India afford a confrontation with the US, China and other major trade partners, and could it withstand a covert economic embargo? Here’s my take, may be naïve and ill informed, but nonetheless relevant.

India’s External Debt

According to the Reserve Bank of India (RBI) latest release, India’s external debt stood at US$736.3bn at the end of March 2025, with a debt-to-GDP ratio of 19.1%. Key highlights of the data are:

Long-Term Debt: US$601.9bn, up US$60.6bn from last year, with commercial borrowings and non-resident deposits driving growth. About 77% (US$568bn) of this debt is owed by non-government entities. The non-government debt is almost equally divided between financial institutions (US$271.3bn) and non-financial corporations (US$261.7bn).

Short-Term Debt: US$134.5bn, representing 18.3% of total debt and 20.1% of foreign exchange reserves.

Components: About one half of external liabilities (US$251bn) is loans and debt securities, 22% currency and deposits and 18% trade credit. The rest 10% includes IMF SDRs and intercompany lending by MNCs.

Maturity: 41.2% of the external debt (about US$305bn), is due to mature within the next 12 months.

Debt Sustainability: Foreign exchange reserves cover 92.8% of total debt, down from 97.4% a year ago, signaling a slight decline in buffer capacity.

Refinancing challenge

With over 40% of long-term debt maturing soon, India faces a refinancing challenge, particularly if global financial conditions tighten or trade disruptions escalate. India’s reliance on Russian oil, which accounts for 35-40% of its crude imports (2.08 million barrels per day in June 2025), has put it in the crosshairs of a proposed US Senate bill. The “Sanctioning Russia Act of 2025,” backed by Senator Lindsey Graham and reportedly supported by President Trump, proposes a 500% tariff on countries importing Russian energy to pressure Moscow over Ukraine. India, alongside China, buys 70% of Russia’s oil exports, making it a prime target.

Economic Impact: A 500% tariff on Indian exports to the US, India’s largest export market, could affect US$66bn (87% of India’s US exports), as per Citi Research estimates. This could disrupt key sectors like pharmaceuticals, IT, and textiles, potentially triggering inflation and job losses.

Oil Dependency: India imports 88% of its crude oil, with Russia offering competitive discounts. Switching to costlier suppliers like the US or Middle East could raise import costs significantly, straining India’s trade balance.

Can India Afford a Confrontation?

India’s economic fundamentals offer some resilience but also expose vulnerabilities.

Forex Reserves: At US$703bn (as of recent data), India’s reserves cover 92.8% of external debt, providing a cushion to manage maturing obligations. However, refinancing US$270.9bn in long-term debt within a year could pressure reserves, especially if US tariffs disrupt export revenues.

Trade Dynamics: The US accounts for a US$45.6bn trade deficit with India. A trade war could prompt reciprocal tariffs, but India’s 12% trade-weighted average tariff (vs. the US’s 2.2%) limits its leverage. Negotiations for a trade deal to cut tariffs on US$23bn of US imports are underway, signaling India’s preference for diplomacy over confrontation; notwithstanding some recent comments of senior ministers that suggest otherwise.

Oil Alternatives: India has diversified its oil imports, with the US supplying 6.3% (439,000 bpd in June 2025) and West Asia 35-40%. While switching from Russian oil is feasible, it would increase costs, potentially impacting fuel prices and inflation.

Can India Sustain Virtual Economic Sanctions?

Virtual economic sanctions, such as the proposed 500% tariffs, or Chinese embargo on export of critical components, chemicals, human resources etc., would act as a severe trade barrier.India’s ability to sustain them depends on several factors.

Energy Security: India’s strategic reserves (9-10 days of imports) and diversified suppliers (US, Nigeria, Middle East) provide short-term flexibility. However, replacing Russia’s 40% share at higher costs could strain refiners and consumers.

Economic Resilience: The RBI’s Financial Stability Report (July 2025) highlights strong banking sector metrics, with declining non-performing assets and robust capital buffers. This suggests India’s financial system could absorb some shocks, but prolonged trade disruptions could erode confidence.

Need for caution

India’s debt remains manageable for now, but over 41% debt maturity in 12 months calls for vigilance. Investors in Indian bonds or banking stocks should monitor refinancing risks.

A US tariff war could hit export-driven sectors like IT and pharmaceuticals hardest. India’s diplomatic efforts to secure a trade deal or tariff waiver will be critical. A successful negotiation could stabilize markets, while failure could spark volatility.

Conclusion

India’s US$736.3bn external debt and looming maturities pose challenges, but its reserves and diversified oil sources provide a buffer. A full-blown confrontation with the US seems unlikely, given India’s diplomatic push and economic stakes. However, sustaining virtual sanctions would strain India’s trade balance and energy costs, making de-escalation the smarter play.

The 41% of external debt (US$305bn) maturing within 12 months is significant, requiring substantial refinancing or reserve drawdowns. India’s US$703bn forex reserves provide coverage, but a US tariff war could reduce export revenues, complicating debt servicing.

Sustained 500% tariffs would disrupt exports, weaken the rupee, and increase debt servicing costs. The RBI’s strong banking sector provides some stability, but prolonged sanctions could erode investor confidence and slow growth.

India’s neutral geopolitical stance and trade deal negotiations (aiming to cut tariffs on US$23bn of US imports) indicate a strategy to avoid sanctions. A waiver or partial exemption is possible, given India’s strategic importance to the US.

Read with US$703bn may be just enough

The Reserve Bank of India holds US$702.78bn in foreign exchange reserves. In the popular macroeconomic analysis, especially in the context of the equity market. this piece of data is often used as one of the points of comfort by analysts.

This data could be viewed from multiple standpoints. For example –

Is it adequate to pay for the necessary imports in the near term, assuming the worst-case scenario of no exports could be made and no remittances are received. Currently, India’s monthly imports are appx US$67bn. However, a material part of these imports is crude oil and bullion. A part of the crude oil and bullion is re-exported after refining/processing. I am unable to figure out the precise net import number for domestic usage, but it would be safe to assume that about three fourth of US$67bn, i.e., US$50bn is for domestic usage. Allowing another 20% for “avoidable in emergencies” category of imports, we have appx US$40bn/month import bill payment obligations. By this benchmark we have sufficient reserves to pay for appx 18months of imports. This is a very comfortable situation from conventional yardsticks.

However, we need to consider interest payment and debt repayment obligations also to assess the adequacy of the foreign exchange reserves.

As per the latest RBI release (see here), India’s total external liabilities stood at US$736.3bn as on 31^st March 2025. 41.2% or appx US$305bn of this debt is due for repayment within the next 12 months. Assuming an average interest rate of 5%, another ~US$35bn would be needed for interest repayments. This implies about half of our foreign exchange reserves are needed for debt servicing in the next 12 month. This matrix raises some questions on the adequacy of our US$703bn reserves.

It also highlights the importance of remittances (appx US$135bn in FY25), foreign portfolio investment (FPI) flows (appx US$13.6bn in CY2024, including equities and bonds), and net foreign direct investment (US$3.5bn in FY25). An adverse movement in any of these flow matrices could materially affect the external stability. This brings in the factors like geopolitical stability, internal political & law and order situation, relative valuations of Indian equities and bonds, market stability and integrity, domestic investment climate, foreign investment policy framework etc. into the picture. Any policy mistake, strife in foreign relations, civic unrest, overvaluation, fraud, scam etc. could adversely impact the external stability.

The news headlines like - “China restricting export of critical components and chemicals to India, withdrawing expert manpower from India” that can adversely affect exports or increase the cost of imports for Indian manufacturers; the US considering to impose tax on the outward remittances”, ‘the US considering 500% duties on countries importing oil from Russia”, etc., - makes one cautious about the external stability of the country.

The experts need to analyze the latest RBI data on India’s external liabilities. In particular, it needs to be assessed whether India can withstand a trade war with the US; a covert geopolitical confrontation with China; frequent cases of market manipulation; policies and procedures that make India a less attractive destination for foreign investments; worsening law & order situation on parochial issue like language, religion, regionalism, etc.

…more on this tomorrow 

 1H2025 was marked by stressful events, high volatility, and uncertainty. In geopolitics, several conventions were breached and new doctrines established. The war between Russia and Ukraine continued. India and Pakistan had a brief but intense conflict. The US entered the Middle East (Israel-Palestine) conflict by attacking Iran.

Climate wise, India had a mild winter followed by a mild summer, impacting crops. Europe continued to witness warmer weather, while the US, Canada, UK, Korea and several other countries in Africa witnessed intense and widespread wildfires, causing immense damage to the climate, lives of people and economy.

Politically, the US witnessed one of the most boisterous power transitions with Donald Trump taking over as the President (POTUS). He started his second term in the White House with radical changes in immigration, trade, and climate change policies. This put the US administration on the path to confrontations with citizens, judiciary, major trade allies (e.g., Japan, EU and China), strategic partners (E.g., Mexico, GCC, Canada and India). Towards the end of 1H2025, however things appear somewhat calming and progressing towards sustainable resolutions. The process of developing a new world order based on new ground realities and future prospects took a few more strides.

Technologically, Artificial Intelligence (AI) entered the lives of common men with Google and X (Formerly twitter) launching their user-friendly models. China launched DeepSeek to compete with ChatGPT (Open AI) and most social media platforms, search engines, financial and other services providers, integrating some sort of AI interface for the users.

Markets were volatile as the forces of hope and fear took turns to dominate the participants’ sentiments. In the end, the forces of hope appear to have emerged stronger. Most markets have recovered their losses and are progressing well on the path to growth.

In India, the economic growth returned to the normal pre-Covid trajectory, as the base effect of FY20 and FY21 low growth tapered off, and external challenges mounted. Equity markets settled close to their all-time high levels recorded in 3Q2024.

The following are some of the highlights of the performance during FY25.

Equity Markets

The Indian equity market managed to end 1H2025 with strong gains, despite yielding negative returns for three out of the six months. Indian equities performed in line with the European and US equities. The benchmark Nifty yielded a return of ~8% (9% in USD terms), which was better than the US markets (S&P500 +6%), Japan (Nikkei +1%) and Europe (Stoxx600 +7%) but much lower than South Korea (KOSPI +20%), Brazil (BOVESPA +14%) and Germany (DAX +20%). The valuation premium of Indian markets to the other emerging markets therefore remained elevated.

Financials saved the day for Indian benchmark indices

The benchmark Nifty (+8%) sharply outperformed broader markets (NSE500 +5.5%, Midcap Nifty 100 4.4%, Smallcap Nifty 100 +1.6%). The gains in benchmark indices were mostly led by banks (Nifty Bank +12.7%). Overall market cap of NSE was higher by 4.6%.

Sector-wise, Financials, Private Banks, Infra were top outperformers. IT Services, Realty, Pharma, FMCG, Energy were notable underperformers. Micro-sector-wise, Defense, Capital Markets, Healthcare, Fertilizers were outstanding. Renewable energy and real estate builders were notable losers.

1H2025 witnessed 3/6 negative months

The benchmark Nifty50 yielded negative month-on-month (MoM) returns for three out of six months in 1H2025. April was one of the best months ever for Nifty, yielding a gain of 16% MoM. The market breadth was negative in three out of six months implying much higher volatility in the broader markets.

Institutional flows positive

Over institutional flows were materially positive for 1H2025. Net domestic and foreign flows in the secondary equity market amounted to Rs2630bn. Foreign Portfolio Investors (FPIs) were however net sellers of Rs945.36bn in the secondary market, while domestic institutions pumped in Rs3575.75bn. On an encouraging note, FPIs were net buyers in the last four months of 1H2025. The nifty-institutional flow correlation was very weak in 1H2025.

Debt and Currency Markets

Indian debt and currency markets were volatile in tandem with the global trend. The benchmark bonds managed to close 1H2025 with decent gains, the long-dated bonds were lower. USDINR ended almost unchanged, but EURINR, JPYINR and GBPINR were materially weaker.

RBI cut the policy rates by 100bps and Cash Reserve Ratio for commercial banks also by 100bps during 1H2025. The benchmark 10-year treasury bond yields eased to 6.31% from 6.80% at the beginning of the year. Lending and term deposit rates were lower by up to 10-25bps. The yield steepened sharply.

The RBI maintained its policy stance to “neutral”. The liquidity position remained comfortable with RBI conducting OMOs to keep the system liquidity in surplus. The credit growth continued to decline; however, there are signs of corporate credit demand picking up. Overnight and call money rates cooled ~50bps.

Economic conditions

4QFY25 GDP growth (+7.4% yoy) came sharply higher than the estimates. The consensus estimates for FY26E GDP growth however remain pivoted to ~6.5%. CPI Inflation mostly remained within the RBI’s tolerance band of 4-6% and has recently breached on the lower side. Core inflation has also eased. Real rates have mostly remained in positive territory during 1H2025. Fiscal deficit continued to decline. The private sector investments failed to gather the desired pace, despite several government incentives. The government capex showed some improvement in 1H2025. External conditions remained stable during 1H2025 despite geopolitical conditions remaining volatile. Lower trade helped the current account balance. However, BoP was briefly negative. RBI replenished most of its USD reserves, expended to support USDINR earlier in the year.

Commodities

1H2025 was a mixed period for commodities. Precious metals (Gold +26%, Silver 23%) and Copper +12.8, recorded good gains, while energy (Brent Crude -11%, Coal -12%), other metals (Steel -10%, Zing -8%) and soft commodities (Sugar -16%, Corn -11%) ended the period with strong losses.

Crypto shine

Cryptocurrencies further strengthened their position with material rise in trading volumes and market capitalization. Bitcoin ended the period 1H2025 with a strong 14% gain. More jurisdictions accepted cryptocurrencies as a valid medium of exchange, financial asset and/or tradeable asset.

After several years of corporate & bank balance sheet repair and fiscal correction, the contours of India's next economic growth cycle are beginning to emerge. With the Reserve Bank of India (RBI) maintaining a growth-supportive stance; union government showing strong commitment to fiscal consolidation, easing financing pressures for the private sector; and global markets showing signs of stabilization as geopolitical confrontations ease and trade disputes settled; the stage is set for a potential economic upswing.

The spotlight is now on three competing themes — corporate consolidation, private capex, and household consumption — each pulling investor attention in different directions.

Corporate begin to re-leverage

After many years of deleveraging, corporate debt in India appears to have bottomed out and is now beginning to rise. This shift in trajectory marks a significant departure from the post-2016 era, where Indian companies focused on strengthening balance sheets following a wave of over-leveraged investments. According to recent analyses, corporate borrowing is rising as businesses seek to capitalize on emerging opportunities.

This shift is supported by a monetary environment that remains broadly pro-growth. The Reserve Bank of India (RBI) has maintained a balancing act between containing inflation and supporting economic momentum. Rates have been cut aggressively and RBI is pushing for a quick transmission.

Fiscal consolidation by the union government is also helping to ease crowding-out pressures in the credit markets. With the Centre projecting a glide path toward more sustainable fiscal deficits, room is being created for the private sector to tap into financial resources more freely.

RBI’s Growth-Supportive Stance and Fiscal Consolidation

The Reserve Bank of India has definitely turned growth supportive in the past one year, after maintaining a delicate balance between inflation growth. The rates have been cut aggressively and liquidity conditions have been made favorable. Targeted interventions to support small and medium enterprises (SMEs) and infrastructure projects, have bolstered private sector confidence.

Simultaneously, the Indian government’s commitment to fiscal consolidation has eased pressure on private financing. By reducing the fiscal deficit—projected to decline to 4.4% of GDP in FY26 from 5.6% in FY24—the government is crowding in private investment. Lower government borrowing means more capital is available for private enterprises, reducing competition for funds and potentially lowering borrowing costs. This synergy between monetary and fiscal policy is creating a fertile ground for private capex to flourish.

Global context changing quickly

Globally, financial markets have been navigating turbulent waters for the past some time. Monetary policies remained tight in major economies like the United States and the European Union. Geopolitical concerns were elevated as multiple war fronts were opened. The political regime changes in the US early this year, also triggered an intense trade war.

However, recent developments suggest a quick shift. There are conspicuous signs of geopolitical stability, particularly with noteworthy steps toward peace in conflict zones. The US administration is showing significant flexibility in negotiating trade deals, raising hopes for an early and durable end to tariff related conflicts. Inflationary pressures are also easing, especially with stable energy prices. These all factors combined raise hopes for a global monetary easing cycle. The US Federal Reserve and the European Central Bank have hinted at potential rate cuts in 2025, which could lower global borrowing costs and improve capital flows to emerging markets like India.

For India, this presents an opportunity to attract foreign portfolio investments (FPIs) to boost market sentiments, as well as foreign direct investment (FDI) for long-term projects, especially in manufacturing and green energy. The government’s Production-Linked Incentive (PLI) schemes and “Make in India” initiatives are well-positioned to capitalize on this opportunity, but execution will be key.

Investors’ dilemma

Amidst corporate optimism, supportive policy environment, positively turning global context, investors and traders are facing a dilemma – whether to stay bullish on the capex theme or turn focus towards the consumption theme that has been lagging behind for the past couple of years.

In my view, investors need to examine two things—

1.    What is driving this resurgence in corporate debt?” Is it being used to fund acquisitions of operating or stressed assets, or is it fueling fresh capacity creation?”

2.    Whether easing inflation, lower interest rates, good monsoon, and improved employment prospects due to capex translating to on-ground activity, will accelerate private consumption growth, or households will focus on repairing their balance sheets and increase savings?

What is driving this resurgence in corporate debt – Consolidation or capacity addition?

The distinction is crucial. While the former drives job creation, productivity, and long-term growth, the latter may only temporarily improve capital utilization rates and return metrics. Acquiring distressed assets or merging with competitors may lead to short-term efficiency gains but could delay the broader economic benefits of new capacity creation. Whereas, investments in fresh capacities could signal a long-term commitment to growth, aligning with India’s aspirations to become a global manufacturing hub.

While mergers and acquisitions (M&A) activity has been robust in the past few years, particularly in sectors like infrastructure and manufacturing, greenfield investments have seen limited areas like renewable energy (driven mostly by government incentives) and steel.

Equity markets are evidently betting on a capital investment Supercycle. Stocks of capital goods makers, construction contractors, and building material firms have seen sharp re-rating over the past year. Order books are swelling, and forward guidance from several listed players suggests growing optimism.

Consumption paradox

While the equity markets are bullish on capex-driven sectors, investor enthusiasm for household consumption remains subdued. This is puzzling, given the macroeconomic tailwinds that should theoretically support private consumption. Easing inflation, which dropped to 4.7% in mid-2025, coupled with the prospect of lower interest rates and improving employment prospects due to rising capex, should create a virtuous cycle of demand. Yet, private consumption, which accounts for nearly 60% of India’s GDP, has been lackluster over the past two years.

Several factors may explain this paradox. First, uneven income distribution means that the benefits of economic growth are not reaching all segments of the population equally. Rural consumption, in particular, has been hampered by volatile agricultural incomes and inadequate infrastructure. Second, high inflation in essential goods like food and fuel, despite overall moderation, continues to erode purchasing power for lower- and middle-income households. Third, policy support in the form of subsidies and cash transfers is being gradually unwound as fiscal discipline returns. Finally, the stress in the household balance sheet, especially in the wake of the Covid-19 pandemic may have also hampered consumption growth.

The equity market’s lack of enthusiasm for consumption-driven sectors like FMCG (fast-moving consumer goods) and retail reflects these concerns. Investors appear to be betting on a capex-led recovery rather than a consumption-driven one, prioritizing sectors poised to benefit from infrastructure spending and industrial growth. However, sustained economic growth will require a revival in household consumption, as capex alone cannot drive inclusive prosperity.

What to do?

The question is what investors should do under the present circumstances? Should they continue to back the obvious beneficiaries of capex — engineering firms, infra developers, lenders to industry? Or should they begin building positions in consumption plays, in anticipation of a cyclical rebound?

In my view, both themes may ultimately play out — but on different timelines. Capex is here and now, led by policy push and balance sheet strength. Consumption is the laggard, but if the macro indicators hold, its turn could come with a lag of a few quarters.

 न चोरहार्यं न च राजहार्यं न भ्रातृभाज्यं न च भारकारी। व्यये कृते वर्धत एव नित्यं विद्याधनं सर्वधनप्रधानम्॥

(Not stolen by thieves, not seized by kings, not divided amongst brothers, not heavy to carry. The more you spend, the more it flourishes always. The wealth of knowledge is the most important among all kind of wealth.)

India stands at a pivotal moment in its journey to becoming a global economic powerhouse. With a young population, a burgeoning digital economy, accelerated clean energy transition, and an ambitious political leadership - the country has immense potential to enhance its participation in the global economy. However, there are several structural and systemic challenges that holding India back from realizing its full growth potential.

In my view, five critical issues that are holding India back are – (i) an inadequate education system; (ii) a feudal governance structure; (iii) a sluggish justice delivery system: (iv) a broken civic services delivery system; and (v) ostentatious social customs that push households to live beyond their means.

While each of these five deserves attention, the education system stands out as the most urgent area for reform. Because education is the root lever. A transformed education system could unlock India’s demographic dividend, drive innovation, and set the stage for sustainable growth. A reformed education system would not only address the skill gap but also have a cascading impact on India’s other challenges. Educated citizens are more likely to demand accountability, weakening feudal governance structures. Financial literacy gained through education could reduce the pressure to overspend on social customs. An empowered workforce would drive economic growth, enabling better funding for civic services and judicial reforms. In essence, education is the catalyst that can unlock solutions to India’s systemic issues.

Inadequate Education System

India’s education system is a paradox. It produces world-class engineers, doctors, and tech leaders, yet a significant portion of its population remains undereducated or unemployable.

In my view, India’s present education system fails to equip the majority of its population with the tools needed for a modern, dynamic economy; or for responsible citizenship. From primary to higher education, issues abound: outdated curricula, rote-based learning, minimal critical thinking, uneven access, poor teacher training, and a governance model that's often more bureaucratic than nurturing. Unfortunately, this system is not just failing students; it’s shortchanging the nation’s future workforce.

According to a 2023 report by the National Sample Survey Office, only 24% of India’s workforce has the skills required for formal employment. This gap is not just a statistic—it’s a structural barrier to growth. To unlock India’s potential, the education system needs a comprehensive overhaul in four key areas: content, delivery, institutional framework, and infrastructure.

Content: Quality, Suitability, Relevance, and Contemporariness

The current curriculum in many Indian schools and colleges is outdated, emphasizing rote memorization over critical thinking, creativity, or practical skills. Subjects like artificial intelligence, data science, and sustainability are rarely integrated into mainstream education, leaving students unprepared for the demands of the 21st-century job market. For example, a 2024 study by NASSCOM highlighted that 60% of Indian graduates lack the skills required by tech industries, despite India’s reputation as a tech hub. 

To address this, the curriculum must be revamped to include: 

·         Interdisciplinary learning: Blend STEM with humanities to foster well-rounded thinkers. 

·         Skill-based education: Focus on coding, financial literacy, and problem-solving to prepare students for real-world challenges. 

·         Global and local relevance: Teach global trends like climate change alongside India-specific issues like rural development. 

·         Regular updates: Establish a mechanism to revise curricula every 3-5 years to stay aligned with industry and societal needs.

Delivery System: Methods, Medium, Accessibility, and Evaluation

The way education is delivered in India often prioritizes quantity over quality. Classrooms are overcrowded, teaching methods are outdated, and access remains uneven, particularly in rural areas. The reliance on high-stakes exams encourages rote learning rather than understanding. 

Key reforms include: 

·         Modern teaching methods: Shift to experiential learning, project-based assignments, and flipped classrooms. 

·         Digital integration: Expand access to online platforms like SWAYAM, ensuring even remote areas have quality resources. 

·         Inclusive access: Subsidize education for marginalized communities and invest in mobile learning units for rural regions. 

·         Holistic evaluation: Replace exam-centric assessments with continuous evaluation systems that measure creativity, collaboration, and practical application.

Institutional Framework: Regulation, Governance, Industry Connect, and Ownership

The governance of educational institutions is often mired in red tape, with limited autonomy for universities and colleges to innovate. Industry-academia collaboration is weak, resulting in a mismatch between what students learn and what employers need.

Reforms should focus on: 

·         Regulatory overhaul: Simplify the regulatory framework under bodies like the NCERT, CBSE, UGC and AICTE to encourage innovation.

·         Public-private partnerships: Encourage industry investment in basic education as part of their CSR efforts to ensure affordable quality education for all.

·         Industry connect: Mandate internships, industry-led courses, and regular employer feedback to align education with market needs. 

·         Decentralized governance: Grant institutions greater autonomy to design curricula and hire faculty, fostering competition and excellence.

Infrastructure: Physical, Digital, and Teacher Training

India’s educational infrastructure is a mixed bag. While urban private schools boast modern facilities, many rural schools lack basic amenities like electricity or clean water. Digital infrastructure is improving but remains uneven, and teacher training is often neglected. 

Critical steps include:

Physical infrastructure: Invest in classrooms, libraries, and labs, especially in underserved areas. 

Digital infrastructure: Ensure high-speed internet and affordable devices for students and teachers. 

Teacher training: Implement mandatory, continuous professional development programs to equip teachers with modern pedagogical skills. 

EdTech scaling: Support startups and platforms that provide scalable, affordable digital learning solutions.

The Path Forward

The government’s National Education Policy (NEP) 2020 is a step in the right direction, with its focus on holistic learning, skill development, and digital education. However, implementation remains uneven. To truly transform the system, India needs: 

Increased investment: Raise education spending from the current ~4% of GDP to at least 6%, as recommended by the NEP. 

Public-private collaboration: Leverage private sector expertise while ensuring equitable access. 

Monitoring and accountability: Establish independent bodies to track progress and ensure reforms are implemented effectively.

India’s potential is undeniable, but its education system is a bottleneck that must be addressed urgently. By prioritizing reforms in content, delivery, institutional frameworks, and infrastructure, India can empower its youth, drive economic growth, and take its rightful place on the global stage.

Also read

Not worried about AI taking jobs

 The Niti Aayog published a working paper titled “India’s Path to Global Leadership: Strategic Imperatives for Viksit Bharat @2047”, in April 2025. The paper presents a roadmap for India’s economic growth, encompassing sustainability, social inclusion, national security, and global leadership.