India's economic growth trajectory is gaining significant momentum, with industrial production surging 7.3% in June, marking its fastest growth in nearly two years. According to The Economic Times, manufacturing and electricity generation showed sharp acceleration, exceeding economists' expectations. This strong performance suggests robust domestic economic growth despite global uncertainties, with capital goods, primary goods, and intermediate goods serving as key contributors to the expansion. The manufacturing sector's remarkable growth in June, bolstered by diminishing global tensions, demonstrates the country's industrial rejuvenation driven by electronics and automotive sectors.
Indian exporters continue to face market-access barriers, tariffs and expanding behind-the-border regulatory barriers in major markets. According to the Competere Foundation report, Indian exporters face increasing barriers from the expansion of the European regulatory zone, especially in sanitary and phytosanitary rules, technical barriers to trade, pesticide residue standards, conformity assessment, sustainability rules and related regulatory systems. The report cautioned that the proposed dynamic alignment of sanitary and phytosanitary rules between the United Kingdom and the European Union could reduce the practical value of agricultural concessions secured under the India-UK Free Trade Agreement. "Tariff reductions can improve formal access, but they do not resolve regulatory barriers that operate through sanitary and phytosanitary (SPS) rules, technical barriers to trade (TBT), conformity assessment, pesticide residue limits, sustainability standards, or the EU Carbon Border Adjustment Mechanism," the report stated.
The report identifies restrictions in retail, e-commerce and digital markets and recommends easing them. Foreign direct investment restrictions in sectors such as e-commerce and retail limit the country's long-term growth potential, according to the foundation. As reported by Business Standard, multi-brand retail trading remains subject to a 51 per cent foreign investment cap under the government route, with minimum investment, back-end infrastructure, local sourcing and state-level conditions. The Indian government recently allowed FDI in inventory-based e-commerce, provided the products are manufactured in India and meant exclusively for exports. "Sectoral foreign direct investment (FDI) caps, government approval routes, and restrictions on business models in sectors such as retail, e-commerce, media, defence, banking and aviation continue to pose as barriers that reduce market contestability and investment," the report noted. The foundation also criticized the proposed Digital Competition Bill (DCB), warning against a shift from traditional "effects-based" competition enforcement to "ex-ante" regulation.
The Competere Foundation estimates that the remaining distortions analysed in this report impose a combined economic loss of approximately $173.6 billion on the Indian economy over five years, equivalent to roughly 4.2 per cent of GDP. According to the report, foreign-investment restrictions account for approximately $127.2 billion of that loss, while competition-policy drift accounts for approximately $46.4 billion. "These losses fall on India first. They reduce productivity, limit investment, weaken contestability, slow technology diffusion, and reduce the gains available from India's own domestic reform success," the report said. Despite these challenges, India has made significant progress in reducing market distortions, climbing 25 places in the foundation's anti-competitive market distortions (ACMD) rankings between 2010 and 2023, moving from #82 to #57. The analysis showed that reforms undertaken during this period have lowered the country's long-run GDP per capita loss from market distortions by 11 percentage points, equivalent to roughly an additional 1 percentage point of GDP per capita growth annually.
The report recommended that India build on its domestic reform agenda by reviewing sector-specific investment caps, maintaining an evidence-based competition framework and working with like-minded exporting nations to push back against disproportionate and non-science-based regulatory barriers in overseas markets. As reported by Business Standard, the foundation emphasizes that addressing these structural challenges will be crucial for India's long-term economic competitiveness and growth trajectory. The report highlighted that the biggest gains have come from reforms such as the roll-out of the goods and services tax (GST), the insolvency and bankruptcy code (IBC), improvements in the ease of doing business and customs digitisation – all of which reduced internal market frictions and improved the overall business environment. Looking ahead, the foundation emphasizes that "India's reform journey over the past decade is one of the strongest economic transformation stories anywhere in the world," with significant scope to continue strengthening the domestic investment environment while enhancing competitiveness in international markets.
