Arvind Panagariya Says India Can Exceed Growth Forecasts as Reform Momentum Strengthens

India’s growth prospects remain strong in the short to medium term, according to Arvind Panagariya, Chairman of the 16th Finance Commission. In an interview to TOI following the submission of the commission’s report, he said recent reforms have positioned the economy to outperform current forecasts.

Panagariya added that with states accelerating reforms alongside the Centre, India could sustain and potentially improve its growth trajectory. He also highlighted employment generation, labour productivity, and global trade expansion as key challenges and opportunities for the years ahead.

India’s Growth Outlook Remains Positive

Panagariya said India’s growth has consistently been underestimated by forecasters despite robust performance in recent years. He noted that infrastructure expansion, rationalisation of personal income tax, the introduction of a two-rate GST framework and the implementation of four labour codes have strengthened India’s economic base.

He further added that with 7.8% growth already recorded in the first quarter, India is well placed to cross 7% growth in 2025–26. Over the next few years, Panagariya expects reforms adopted by both states and the central government to support faster and more durable growth.

Key Employment Challenges Ahead

Panagariya emphasised that India’s biggest structural challenge is the creation of high-productivity, well-paid jobs.

• 46% of India’s workforce remains engaged in agriculture
• Half of agricultural landholdings are smaller than half a hectare
• 40% of workers are either self-employed or part of small establishments with minimal capital
• Only 10% of the workforce is in enterprises employing 20 or more workers

He said that improving labour productivity and creating large-scale formal jobs remain essential for accelerating economic growth.

Reforms Needed to Sustain High Growth

Despite significant progress since the 1991 reforms, Panagariya said considerable work remains.

• Labour-market reforms must be taken forward by the states
• Urban land markets need correction due to high price distortions
• Custom duties should be rationalised and reduced
• Privatisation in non-strategic public-sector enterprises must be revived
• Trade agreements with the US and EU need to be expedited

According to Panagariya, clearing these bottlenecks would accelerate investment, productivity and economic competitiveness.

Read More: CAG Pushes for Uniform Fiscal Reporting Across States.

Conclusion

Arvind Panagariya’s outlook signals confidence in India’s ability to exceed growth expectations for 2025–26 and beyond. Strong reform momentum, spanning infrastructure, taxation, labour and trade, has strengthened the foundation for sustained expansion.

However, he stressed that addressing job creation, correcting market distortions and advancing trade integration will be key to achieving higher long-term growth. With coordinated action between the Centre and states, India could move closer to the high-growth trajectories seen in other Asian economies.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.