India is expected to remain one of the world’s fastest-growing major economies in 2026. The International Monetary Fund projects a growth above 6 per cent. Government tax collections are robust. Infrastructure spending is at record levels. Stock markets, despite bouts of volatility, continue to trade near historic highs.
Yet beneath these impressive numbers lies a curious paradox. Many Indians do not appear to share the optimism embedded in the macroeconomic narrative. Consumer confidence surveys remain subdued. Households continue to worry about jobs, incomes and rising living costs. The question is not whether the economy is growing. The question is why growth feels so uncertain.
The answer lies in the difference between economic performance and economic experience. For policymakers and economists, gross domestic product is the primary measure of success. For households, however, the economy is measured very differently. It is measured in monthly budgets, school fees, medical bills, housing costs and job security.
The Reserve Bank of India’s Consumer Confidence Survey has repeatedly highlighted this gap. While respondents often express optimism about future conditions, perceptions of prevailing economic conditions remain significantly weaker. Concerns about inflation and employment continue to weigh on sentiment even when headline growth remains strong.
One reason is that inflation leaves a lasting psychological imprint. India’s retail inflation has moderated considerably from the highs witnessed after the pandemic. But inflation is a rate of change, not a reversal. When inflation falls, prices do not return to previous levels. They simply rise at a slower pace. For millions of households food, education, healthcare and housing remain substantially more expensive than they were a few years ago.
This creates what economists call a “money illusion gap”. Incomes may be rising nominally, but households judge their well-being by purchasing power. If salary increases fail to keep pace with accumulated cost increases, people feel poorer even when official income statistics suggest otherwise.
Employment presents another challenge. India’s unemployment rate, according to various labour market indicators, may not indicate a crisis. Yet employment quality remains a persistent concern. The Periodic Labour Force Survey shows rising workforce participation, but much of the increase has occurred in self-employment and informal work. Secure, well-paying jobs continue to lag the aspirations of a young and increasingly educated population.
In addition, even for the employed, the job security is increasingly becoming a telling concern. Specially, with the advent of AI, the apprehension for losing the job, even the hard technical roles, has become a veritable nightmare. This has added to the existing concerns.
This helps explain why economic confidence remains fragile. People do not make spending decisions based solely on today’s earnings. They make them based on expectations about tomorrow. A household uncertain about future income is more likely to postpone buying a car, renovating a home or making other discretionary purchases.
The divergence between different segments of consumers further complicates the picture. Premium housing, luxury goods and high-end services continue to perform strongly. At the same time, several mass-market consumer sectors have reported uneven demand. The result is an economy where prosperity is visible but not equitably experienced. The real economic challenge is that aggregate growth does not automatically translate into broad-based confidence. History suggests that confidence matters as much as growth itself. Consumption accounts for more than half of India’s GDP. If households feel insecure about the future, they spend less, thereby reducing the demand pull.
Economics does not end with just hard numbers and statistics. It very much involves socio-economic perception and behaviour. India’s economic debate therefore needs to move beyond headline GDP numbers. The real question is not whether the economy is expanding. It is whether citizens feel secure enough to participate fully in that expansion.
(Sabari Raychaudhuri is a professional accountant and an avid watcher of corporate issues)
