India begins the new year in a curious mood—not euphoric, not anxious, but mildly alert—like a seasoned commuter who has learned that every green signal could still hide a pothole. Growth is steady, inflation is mostly behaving, corporate balance sheets look fitter than they have in years, and yet the breathless inevitability once attached to India’s rise has softened. The world has turned noisier, capital more judgmental, and policy choices far less forgiving.
2025 was the year when several comforting assumptions were quietly escorted out of the room. For example, markets learnt—again—that liquidity is not a guaranteed elevator, only an unreliable escalator that occasionally goes in reverse. Corporate leaders discovered that PowerPoint optimism ages badly without spreadsheets to back it up. Governments were reminded that ambition must now wrestle not just with economics, but geopolitics, climate anxieties, and voters who have Google.
For much of the last decade, India enjoyed a helpful global tailwind—cheap money, expanding trade and a demographic dividend expected to do much of the heavy lifting. That era is fading. What replaces it will decide whether the next decade is one of steady compounding—or periodic explainers.
Consider the markets. 2025 was a masterclass in how headline indices can smile politely while the rest of the market quietly grimaces. Benchmarks ended with respectable single-digit gains, but three out of four listed stocks finished the year in the red. The once-popular idea that buying “India growth” was a single-click trade finally met reality. Investors were forced to rediscover old-fashioned skills—like reading balance sheets, distinguishing leverage from genius, and recognising that “vision” is not a substitute for cash flow.
The initial public offering (IPO) boom delivered its own paradox. While secondary markets struggled, the primary market flourished, clocking record fundraising even as listing gains cooled sharply. Promoters learnt that markets are still generous—but less gullible. Investors, meanwhile, began separating businesses that were merely large from those that were actually durable. The age of indiscriminate exuberance hasn’t ended, but it now requires stronger justification.
India Inc enters 2026 slimmer, sturdier, and quietly more confident. Debt levels are lower, capacity utilisation is inching up, and banks are lending without flinching at every quarterly result. The credit cycle has moved from therapy to ambition.
Can Private Capex Replace the Public ‘Gym Instructor’?
That is precisely where the difficult decisions begin. Public investment has carried the economy for several years—roads, ports, railways, digital plumbing. The returns are visible, as logistics costs are easing; supply chains are thickening; and manufacturing is no longer just a slogan shouted at conferences—it exists, noisily, on the ground. But public capex cannot be the economy’s permanent gym instructor. Fiscal space is tightening. Voters want pay slips, not just flyovers. The baton must now pass to private investment.
That handover will not be automatic. It needs regulatory predictability, faster dispute resolution, and a clearer social contract around land, labour, and capital. Progress has been made—but not enough to unleash animal spirits at scale. Reform, like that gym membership everyone renews in January, remains unfinished business.
Globally, the mood music is less friendly. Protectionism is no longer an exception; it is policy. Supply chains are splitting along political lines. Energy security has joined defence policy at the grown-ups’ table. For India, this is both opportunity and stress test. The country is well-positioned to benefit from diversification away from China—but only if it can offer consistency, speed, and scale at the same time. Partial competitiveness, sadly, is no longer competitive.
From Pilots to Production
Then comes technology—the great accelerant and occasional prankster. Artificial intelligence (AI) went from curiosity to compulsion in 2025. India became one of the world’s largest AI user bases almost overnight, powered by cheap data, smartphones and an enthusiasm for asking machines questions we once reserved for relatives. Banks deployed it, startups embedded it, consumers embraced it. What India did not yet do at scale was invent it.
That gap matters. Adoption without innovation creates dependence. Scale without intellectual property limits long-term value. India’s challenge in 2026 is to turn usage into research, talent into breakthroughs, and startups into deep-tech companies that don’t need to explain themselves with footnotes. That requires patience, capital, and a willingness to fund failure—still an uncomfortable idea in boardrooms and ministries alike.
AI will also test India’s labour model. Services employ millions, directly and indirectly. Automation will not erase jobs overnight, but it will quietly rewrite job descriptions. The real risk is not unemployment; it is underemployment. Preparing workers for that transition—through skilling, mobility, and credible safety nets—will be one of the decade’s most underestimated challenges.
At the household level, consumption tells a subtler story. Premiumisation coexists with price sensitivity. Urban consumers are selective; rural consumers are careful. Aspirations remain high, but spending is increasingly deliberate. This is not pessimism. It is adulthood.
None of this negates the positives. India remains among the world’s fastest growing large economies. Its demographic advantage, though narrowing, still offers momentum. Its digital public infrastructure is admired globally. Its financial system is stronger than it has been in decades. And perhaps most importantly, its current failures are failures of execution, not of direction.
As 2026 begins, India stands at a threshold. The easy gains—from macro stability, balance-sheet repair, and global liquidity—are largely behind it. The next phase will be harder, slower and less forgiving. It will reward competence over charisma, patience over hype, and institutions over individuals. That may sound sobering. It is also a sign of maturity.
New Year’s Day is for resolutions. India’s, at least economically, should be simple to state and difficult to achieve—to grow not just faster, but better; to create not just wealth, but resilience; and to finally accept that there are no shortcuts left. If it manages that—preferably without tripping over its own optimism—the decade ahead may still belong to it.