Domestic economy needs robust growth engine for sustained expansion: DSP NETRA

Post-pandemic headwinds in services and structural challenges in agriculture call for strategic interventions to sustain long-term growth

May 14, 2025

The pandemic deeply impacted the services sector, with contact-intensive industries dragging down overall growth momentum

Average annual GVA growth in services declined from 7.7% (2010–2020) to 5.2% (2020–2025), underlining a post-pandemic moderation

The agriculture sector has historically underperformed, with growth dipping to 2.0% between 2000 and 2010, requiring long-term reforms

While manufacturing showed robust growth, the construction sector remained volatile across decades

According to a new report by DSP NETRA, India’s domestic economy is at a pivotal moment and must cultivate a resilient, sizable, and consistent growth engine to ensure sustained long-term expansion. The report warns that maintaining India’s long-term Gross Value Added (GVA) growth trajectory—currently projected at 6.1% compound annual growth rate (CAGR)—will be challenging without such a strategic focus. The domestic economy is still contending with aftershocks from the pandemic, particularly in sectors that were heavily reliant on physical contact and mobility.

The most significant setback has emerged in the services sector, which has historically driven India’s economic growth. Contact-intensive industries such as trade, hotels, and travel were severely impacted during the pandemic. Although there was a sharp revival in the immediate aftermath, the sector continues to face headwinds from sluggish consumption and an early tapering in wage and salary growth.

DSP NETRA’s findings show that the services sector’s average GVA growth has declined notably, from 7.7% in the 2010–2020 decade to 5.2% in the ongoing 2020–2025 period. Experts attribute this slowdown to the lasting disruptions caused by COVID-19, particularly in tourism, hospitality, and transportation.

Agriculture, forestry, and fishing have also consistently underperformed. The sector grew at a modest 3.1% between 1990 and 2000, slowed to 2.0% between 2000 and 2010, and saw a limited recovery to 4.4% in the decade following. The report underlines the urgent need for structural reforms and targeted investments in agriculture to enhance productivity and build long-term resilience.

On the other hand, the industrial sector presents a more mixed picture. Manufacturing experienced strong growth of 7.9% between 2000 and 2010. However, construction, though initially buoyant with 9.4% growth during the same period, saw a decline to 4.9% in the following decade, indicating cyclical volatility.

The report credits the Information Technology and IT-enabled Services (IT&ES) sector for anchoring India’s post-pandemic recovery. However, it cautions against over-reliance on a single sector. To ensure economic sustainability and minimise vulnerability to sector-specific shocks, the report emphasises the importance of broad-based growth across agriculture, industry, and services.

In sum, while India’s economy shows pockets of strength, a more diversified and resilient domestic economic engine is essential to sustain growth and withstand future disruptions.

Source: Economic Times

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