Where do we go from here? 5 ways India can navigate global uncertainties

India’s high logistics costs – around 14 per cent of the GDP – remain a major barrier to manufacturing and export competitiveness.¹ A large part of this stems from inefficiencies across freight systems. The average speed of rail freight, for instance, is 25km/h-well below the global average.² And despite ongoing improvement efforts, the progress has been slow. Rail capacity continues to fall short of growing demand. On the other hand, road transport-which comprises majority of India’s freight-faces its own constraints. This includes narrow stretches and seasonal disruptions during monsoons. Besides this, there is also a need to step up efforts towards port modernisation to match global standards in efficiency and turnaround time. Collectively, these challenges drive up logistics costs, making Indian manufacturing less competitive, especially for MSMEs.

While the government is making a push through multi-modal infrastructure development, implementation needs to move faster. On an encouraging note, higher GDP growth and record RBI dividend have created fiscal space to increase capital expenditure in FY26, creating more room to fund infrastructure priorities.

To tide over global uncertainties in the short term, the government can implement reformatory measures like the emergency credit line guarantee scheme (ECLGS), interest subsidies, easy loan options and other export incentives.

Over the long run, simplifying administrative complexities will be key to sustaining momentum. A more streamlined framework can help in minimising compliance burdens and enhancing transparency. For example, each state has its regulatory requirements that vary widely. Many states mandate separate registrations and differing documentation, often making it difficult for global firms considering India as a long-term investment destination. Going ahead, we need to quickly move towards a single-window clearance system. This will make India more attractive to foreign investors, particularly global anchor firms that can act as ecosystem enablers. Their presence can boost productivity gains, accelerate innovation and drive growth of supply networks, skills and infrastructure across sectors.

Complex labour laws are a growth barrier. For instance, current regulations offer limited flexibility in hiring and restructuring, especially for mid-sized firms, making it harder to respond to demand fluctuations or scale. Besides, companies operating in multiple states face different compliance norms, raising costs and slowing expansion. In contrast, many competing economies have adopted a more agile labour framework.

A comprehensive review of existing laws can be considered to strike the right balance between safeguarding worker welfare and enabling business growth. A more agile and industry-specific framework can not only protect worker rights but also help businesses scale flexibly. This can help to increase the share of workers in the formal sector – currently at 8 per cent – to higher levels.³

Boosting domestic consumption will also be key as one of India’s key strength lies in its domestic market. With income tax relief, softer inflation and falling interest rates, demand – especially from lower and middle-income groups – is likely to pick up. India’s CPI inflation eased to a six-year low of 2.1 per cent in June (as reported by India Macro Indicators) and with the new  Goods and Servies Tax (GST) reforms, consumption could increase.⁴ The government can continue to build on its existing policy approach. An accelerated revival in spending can not only support growth but also cushion the economy against external shocks.