Iran-Israel War : Causes and Impact on India and World Economy

 

Why is it in the news?

1. Israel launched a blistering attack on Iran’s nuclear and military structure on 13th June 2025, thereby, killing top Generals and Scientists. The attack was meant to stop Iran from making atomic weapons. About 200 aircrafts were involved in the initial attack on about 100 targets. Israel attacked Iran’s main nuclear enrichment facility at Natanz. Israel also claimed that it destroyed dozens of radar installations and surface to air missile launchers in western Iran. The Israeli Prime Minister Benjamin Netanyahu vowed that operation Rising Lion would continue for as many days as it takes to remove Iran’s nuclear weapons programme because it was described as an existential threat to the Jews state.  

2. Iran immediately retaliated by sending a swarm of drones to Israel. It is reported that Iranian Missiles have heavily damaged Israeli port city of Haifa and its capital Tel Aviv. 

3. India is deeply concerned about the situation in West Asia after Israel claimed that it carried out attacks on multiple targets in Iran. India urged both sides to avoid any escalation steps. India enjoys close and friendly relations with both the countries and stands ready to stand all possible support. India urged both the countries to use dialogue and diplomacy towards de-escalation of situation and resolving underlying issues.The embassy of India in Iran had urged Indian citizens to remain vigilant and avoid all unnecessary movements.  Shanghai Cooperation Organisation (SCO) condemned the military strikes carried out by Israel. However, India distanced itself and did not participate in the discussion. 

4. Left parties on the other hand urged the Union Government to condemn Israel otherwise silence will be seen as complicity. The party said that attack could spark a broader regional conflict and create more instability in west Asia.  

5. Iran finds itself politically isolated in the region. Many Arab states are as concerned as Israel about Iran’s nuclear ambitions. Moreover, the Atomic Energy Agency passed a resolution declaring Iran in violation of its legal obligations under the nuclear non-proliferation treaty and dangerously close to acquiring nuclear weapons. Several Arab and Muslim majority nations including Algeria, Bangladesh, Indonesia, Qatar, Saudi Arabia and Turkey did not oppose the resolution instead they quickly condemned Israeli strikes. 

Causes of Conflict between Iran and Israel

1. Ideological and religious rivalry : Islamic revolution in Iran in 1979 turned it into a Shia theocracy. It strongly opposes Israel as an illegitimate zionist entity and so it wants to wipe out Israel. Israel, on the other hand, thinks the orthodox Islamist ideology of Iran as an existential threat to it and so there is deep rooted animosity between two countries. Apart from ideology, the divergent religious affiliations further add to their enmity. Both countries want a favourable balance of power in West Asia.  Thus, Iran opposes Abraham accords of UAE, Behren, Saudi Arabia with Israel. So, since the founding of Islamic Republic in 1979, both countries are at lower heads. Over the decades Iran has popped up regional proxies to ensure a severe but cost effective military option vis-a-vis Israel. Iran created, co-opted and emboldened several non-state players committed to Israel's defeat.  Through this proxy war, Iran has successfully expanded its influence beyond its territorial limits and its sphere of influence can be felt not only in the immediate vicinity of the Persian Gulf but also in the Mediterranean sea, the Red sea and the Northern Arabian Sea. 

2. Nuclear threat of Iran :  Israel views Iran’s nuclear programme as an existential threat. It apprehends that a nuclear armed Iran would target it. It claimed that Iran had enough enriched uranium for making multiple nuclear bombs. In addition, Iran non-complied with the nuclear non-proliferation agreements put forward by the International Atomic Energy Agency [IAEA]. This prompted Israel to launch preemptive strikes on 13th June under the code name of operation Rising Lion. Israel struck  nuclear sites like Natanz, Khondab and Isfahan. The strike was meant to prevent Iran from crossing the nuclear threshold. 

3. Weakening of the Axis of Resistance headed by Iran :  Iran has been supporting anti-Israel groups like Hamas in Gaza, Hezbollah in Lebanon, Houthis in Yemen, popular mobilisation forces in Iraq and Assad Regime in Syria. In spite of the military offensive, Israel has not been able to defeat Hamas in the Gaza strip, Hezbollah in Lebanon. PMFin Iraq. The destruction of several infrastructure including Sanaa airport has not forced the Houthis to seek a truce with Israel. So, now Israel now seeks to minimise the long term potential of these militant groups by targeting the source of their political legitimacy and military support. According to Israel, Iran supported Axis of Resistance cannot be defeated without directly confronting Iran. The direct confrontation between Iran and Israel in April and October 2024 did not significantly alter the situation. Moreover, the increasing power of Iran further compelled Gulf countries led by Saudi Arabia to bury their hatchet against Israel and so these Sunni Arab countries moved closer to Israel. Looking to the above favourable condition, Israel this time decided to target Iran itself. 

4. Domestic political pressure : Experts are of the view that the decision of the Prime Minister Netanyahu to strike at Iran was driven by domestic politics. Since, the Prime Minister is facing corruption charges. He wants to prolong the war with Iran. The main aim is to overthrow the orthodox Islamic regime of Ayatollah Khamenei. This would bring popularity of the PM among Israeli people. 

5.Immediate provocation - the accelerated production of ballistic missiles by Iran was construed as a threat to Israel. The seizure of Israeli linked ships in 2024 by Iran and support for Houthi attacks on Israeli ships further heightened tensions. The failure of US-Iran nuclear talks, bombing of Iranian consulate in Damascus in April 2024 by Israel and retaliatory missile attacks at Israel in October 2024 for assassinations of Hamas and Hezbollah leaders further escalated tensions between both countries. 

Impact on India

1. Rising oil prices : Since India imports 80% of its oil for its domestic needs and since 40% oil imports come from the Middle East, a prolonged war between Israel and Iran would lead to a spike in oil prices. It is expected that the oil prices had jumped to $75 per barrel. It should be noted that oil prices above $80 per barrel would increase the import bill by $10-15 billion, thereby widening the trade deficit. In addition, the higher fuel cost can drive inflation leading to rise in consumer prices and industrial costs. 

2. Weakening of Rupees : A higher import bill would weaken the Indian Rupee, despite strong forex reserves. A depreciating rupee would raise import cost for non-oil goods, thereby impacting MSME sectors. 

3. Trade disruption, a prolonged Iran-Israel war will have an impact upon India’s trade with Israel since India exports petroleum products heavily. Disruption in the supply chain would further hit India’s export of petroleum products to Israel. Moreover, the protected war would threaten India’s energy security. 

4. Migrant workers and evacuation : About 1600 Indian students are studying in Iran. 183 pilgrims are stranded in Iraq. They require urgent evacuation. Moreover, prolonged Iran-Israel war will have an impact upon remittances sent to India. It should be noted that more than 8 million Indian workers are employed in Gulf Countries and around $125 billion remittances are sent by them to India. Any disruption will have an impact upon the economy of India and especially Kerala. 

Impact on World Economy

1. Oil market volatility : The prolonged war would push the oil prices to $100-150 per barrel, leading to stagflation. It is feared that attack upon oil wells of Iran by Israel may cause severe affect upon the overall oil production. It should be noted that Iran exports $2.5 million barrels per day. 

2. Inflation and Growth : Rising oil prices may lead to inflationary trend in the Global economy and may lead to slow global GDP growth. 

3. Financial markets : On account of the Iran Israel war, global stock markets plumated sharply. Investors took their money from the banking institutions to purchase gold and dollars. 

4. Disruption in Supply chain : Prolonged Israel-Iran war would further impact industries worldwide dependent upon petroleum products. 

5. Fear of arms race in West Asia : The withdrawal of Iran from the non-proliferation treaty would spark arms race thereby, destabilising markets and diverting resources. 

Ways Out 

1. Diplomatic De-escalation : Since India has very good relations with Iran and Israel, it should take the lead in pushing for a ceasefire. Both the UN and BRICS countries can take initiatives for the normalisation of relationship between two countries. 

2. Energy Diversification : India should accelerate renewable energy and boost domestic oil production in order to reduce its dependence on oil imports.  Nations should have strategic petroleum reserves to stabilise prices. 

3. Economic stabilisation : An effort should be made to provide subsidies on fuel to give relief to consumers. Central banks across countries must coordinate to mitigate inflation spikes. Reserve Bank of India, should manage rupee volatility through forex interventions. Similar steps should be taken by central banks of other countries. 

4. Humanitarian and evacuation plans : India must prioritise evacuating stranded citizens through airlifts and sea routes by coordinating with Gulf Countries. The UN should provide a safe route for refugees living in adjoining countries of Israel and Iran. 

5. Strengthening regional alliances : India should deepen its ties further with Saudi Arabia and UAE to secure alternative oil supplies. India and EU should also mediate to prevent US-China proxy escalation.

Conclusion 

1. The Iran-Israel war threatens global stability and economic recovery. Rising oil prices, trade disruptions and stranded citizens pose immediate challenges. The prolonged conflict may pose global stagflation, market turmoil and nuclear arms race. India should play a proactive role to keep the balancing act between Israel and Iran. Israel is a trusted friend of India. It is the third largest military hardware supplier to India after Russia and France, India is dependent upon Iran for huge oil imports and Chabahar ports which would connect it with Afghanistan and Central Asian countries. A prolonged war would further escalate oil prices in India and worldwide leading to the inflationary trend in the economy and slowing down of the economy worldwide. 

The Economic Growth is not enough in India

Why is it in the news?

1. The international monetary fund recently projected that India will ease past Japan to become the world's fourth largest economy by the end of 2025. Thus, the size of the Indian Economy would be $4.19 trillion. The other biggest economies are the USA ($28 trillion), China ($18 trillion) and Germany ($4.5 trillion). India is poised to achieve a GDP of $5 trillion in 2027 and $10 trillion by 2035. This is a remarkable achievement for a country that began its journey as an independent nation in 1947 with the meagre $33 billion economy. 

2. Although absolute GDP figures are useful for understanding the size of an economy, yet they do not point out as to how wealth is distributed, how developed a country is and how much its citizens are enjoying the lives of prosperity ? Thus, it masks cost of living, income inequality and disparities in population size. A country may have a large economy but that does not necessarily translate into prosperity or improved living standards of its people. 

What is Gross Domestic Product?

1. GDP is the total monetary value of all final goods and services produced within a country’s borders over a specific period of time, say one year. It measures the economic activity of a nation, including consumption, investment, government spending and net exports. Thus, GDP measures production within a country’s borders regardless of who produces it. It includes the total value of production without accounting for depreciation. Again it excludes income earned by residents abroad or income paid to foreigners. 

2. On the other hand national income/net national income focuses on production by country’s residents, whether inside or outside the country including income from abroad. It subtract depreciation from GDP to reflect the net value of production. It includes net foreign income i.e. income earned abroad minus income paid to foreigners. For example, if a country has a GDP of one trillion dollars and depreciation of $150 billion  and net foreign income $100 billion. Thus, NNP/National Income would be one trillion dollars - $150 billion + $100 billion = $950 billion. 

3. GDP can be calculated using three approaches : - Production, Income and Expenditure. The production approach or value added approach to measure GDP calculates the total value of goods and services. Thus GDP = (Gross value added) +Taxes on products - Subsidies on products.

Where : Gross value added (GVA) = Value of output - Intermediate consumption for each sector which is the cost of raw materials and services used in the production process. Thus, this approach ensures that only the value added at each production stage is counted, avoiding double counting of intermediate goods. In this process,  the economy is divided into various sectors and then gross value added is calculated at each stage of production and then taxes like sales tax and GST are added. The sum total of products - subsidies on the products given by the Government is the Gross GDP. 

4. The income approach to measure GDP calculates the total income earned by individuals and businesses in an economy from the production of goods and services. Its sums up all income generated in the production process, such as wages, profits and rents. According to this approach GDP = Compensation of employees + Gross operating surplus + Gross mixed income + taxes on production and imports - subsidies.

 Where : (A) Compensation of employees means total wages, salaries and benefits paid to workers including social contribution like pension, health insurance. 

(B) Gross operating surplus means profit earned by businesses, including corporate profits, depreciation (capital consumption) and net interests. 

(C) Gross mixed income means income earned by self employed individuals and unincorporated businesses or informal sector, combining wages and profits. 

(D) Taxes on production and imports means indirect taxes like sales tax or GST imposed on production and imports. 

(E) Subsidies means Government payment to producers to lower the cost of production. 

Thus, this formula captures the total income earned by all factors of production like labour, capital and entrepreneurship within the country. 

5. The expenditure approach to measure GDP calculates the total value of all goods and final services produced within a country by summing the expenditures made by different sectors of the economy. The formula is GDP = C + I + G + (X-M) where 

(A) C (consumption) means total spendings by households on final goods and services such as food, clothing and healthcare. 

(B) I (investment) means expenditure by businesses on capital goods like machinery, buildings, inventories and residential investments by households. 

(C) G (Government spending) means expenditures by the government on goods and services such as infrastructure, defence and public services excluding transfer payments like pensions or interests. 

(D) X (exports) the value of goods and services produced domestically and sold abroad.

(E) M (imports) means the value of goods and services purchased from abroad. Thus, imports are subtracted from exports to avoid counting of foreign production, giving net exports of a country. 

Thus, the expenditure approach focuses on the demand side of the economy. It ensures that only final goods and services are counted, avoiding double counting of intermediate goods. 

Limitations of GDP

1. GDP measures total economic output but does not reflect how income or wealth is distributed. For example, a country with high GDP may still have significant poverty or inequality among its population. Thus, It is estimated that India’s absolute GDP has risen from $468.4 billion in 2000 to $1487 billion in 2025, surpassing Japan’s GDP. However, India’s GDP per capita is 12 times lower than that of Japan’s in 2025. [Source: The Hindu]. 

Similarly, the above chart also shows that while the total GDP of Poland is around 4 times smaller than that of India but its GDP per capita is 9 times greater  than that of India. 

2. GDP does not capture non economic factors like health, education, life expectancy or happiness. Thus, a country may have high GDP but poor living conditions or low social welfare. Thus, in India, the gross enrollment rate in college education after completion of secondary school was 32.7% in 2022 compared to 65% in Japan and 75% in Poland.

 

Similarly, GDP of a country does not reflect adequate healthcare infrastructure. For example, in India, the infant mortality rate in 2022–23 was 28 deaths per 1,000 live births and the maternal mortality ratio was 97 deaths per 100,000 live births, which was significantly higher compared to Japan (IMR: 1.7, MMR: 5), South Korea (IMR: 2.6, MMR: 11), and China (IMR: 5.0, MMR: 16). On the health front, the life expectancy of a person was 72 years for an average Indian in 2023, compared to 84 years in Japan, 78.5 years for Poland, 78.2 years in China, 83.6 years in South Korea, 77.5 years in the US, and 80.7 years in the UK. 

3. GDP also does not take into account the employment opportunities to the people. For example, the share of wage and salaried workers from regular employment in India was just 23.9% in 2022 against 91% in Japan and 80.1% in Poland . 

4. The GDP also does not take into account the sectoral distribution of workforce and changes therein for example nearly 45% of the workforce in India is employed in agriculture compared to Japan where less than 10% people are employed in agriculture. In 2023, the share of employment in the service sector in India was 31.5% while for Japan it was 73.3% and for Poland it was 62.8%.

 In the Industrial sector, India witnessed a rise of 25.03% employment in 2023 from 16.3% in 2000  compared to Japan which slipped from 31.1% (2000) to 23.71%, indicating a shrinking of its economy. 

 Thus, a country may have high GDP but may suffer from poor living conditions. 

5. GDP also does not take into account non market activities like household work or voluntary services. 

6. It also does not take into account environmental degradation or resource depletion. A country may boost up its GDP growth by proliferation of timber factories or opening of big industries. These activities may cause deforestation or pollution in the long run. This will ultimately cause irreparable damage to the economy. 

7. GDP does not take into account the depreciation of the capital assets. It only talks about gross investment. It also does not take into account the quality of life. 

8. GDP also takes into account the regional variation within the country while some areas may be economically very strong while others are lagging far behind. For example, the per capita income of Goa is ten times greater than that of Bihar. 

9. GDP focuses solely on the quantity of goods and services produced without taking into account quality, innovation or efficiency.

10. It emphasises current production and consumption without considering long term consequences such as debt accumulation or unsustainable growth patterns. For example, India had debt burden of ₹55 lakh crore in 2014 which increased to ₹181 lakh crore in 2024

Alternative methods of calculating the economy performance and social progress 

While GDP is a useful indicator of economic activity, it falls short in measuring overall social progress, environmental sustainability and equitable distribution of wealth.  That’s why, alternative methods to measure the economy of a country have been invented. These are genuine progress indicators, human development index, gross national income, net national income, inclusive wealth index and multidimensional poverty index. 

A) Gross Progress Indicator (GPI) = GDP + Value of Non market activities - cost of negative externalities like environmental degradation. However, it is very difficult to objectively assess environmental and social costs. 

B) Gross National Income - It is derived by adding GDP with net income from abroad. On the other hand net national income = gross national income - depreciation. However, net national income also suffers from limitations because it does not take into account non-market activities and environmental degradation. 

C) Inclusive wealth index = value of produced capital (infrastructure) + human capital (education and skill) + natural capital (resources and ecosystems). The above index also suffers from the exact valuation of intangible assets like human and natural capital. 

D) Human Development Index is derived by taking into three dimensions like life expectancy (health), education (mean and expected years of schooling) and standard of living (Gross national income per capita adjusted for purchasing power parity) HDI is derived by 3life expectancy index * education index * income index . The HDI is derived in the scale of 0-1 in the ascending order. The developed countries have HDI more than 8.5. HDI of India is 0.685 in 2023 as per the UNDP calculation, putting it in the middle income category and developing status. While HDI of Japan and Poland crossed 0.9 mark, putting it to very high human development. 

However, HDI does not take into account inequality, environmental degradation or happiness of the people. 

Conclusion 

1. To improve the human development index of India (HDI = 0.685) to make it at par with China (0.788), Japan (0.925) and South Korea (0.929) in 1923,  it is imperative to make significant improvement in three core dimensions of health, education and standard of living. India must strive for universal health insurance for all Indians by strengthening the 100% coverage to its population, increasing healthcare spending from the present 2% of GDP to 6% aligning with China (6%), Japan (10%), South Korea (8%). These measures would enhance the life expectancy in India by 3-5 years by 2030. 

2. India must strive for expanding the mid-day meal scheme to combat malnutrition among children. Focus should be upon clean water and sanitation to reduce water borne diseases. These diseases lead to 20% infant mortality. 

3. There must be priorities to improve upon the health facilities in underdeveloped states like UP, Bihar, Jharkhand, Chhattisgarh, Madhya Pradesh.

4. Mean years of schooling is 6.9 years and expected years of schooling is 13 years in India compared to MYS in China 8.2 and EYS 14.3. In Japan MYS is 12.8 years and EYS is 15.2 years. In order to bridge the gap, India must raise education spending from 4% of GDP to 6%. It must ensure universalisation in secondary education, especially for girls and rural students. There is a need to increase the building of more schools in remote areas. India must improve education quality by incentivising teachers training. An effort should be made for gender and regional equity. 

5. India must raise standard of living by increasing the gross national income per capita from the present $9046 in 2023 to at least $15000 by 2030 to catch up with China ($20013), Japan ($41010) and South Korea ($45560). In order to bridge the gap, India must strive for rapid industrialisation and export led growth in electronics and value added goods. The contribution of the manufacturing sector (at present 16%of GDP) must be increased to 28% of GDP by 2030. The manufacturing and construction sectors have huge capacity to absorb unemployed or underemployed youths in agriculture. 

6. India must strive to bridge the gap between the urban and rural economic development. It must invest in rural infrastructure like roads, electricity, irrigation and farming. Schemes like MGNREGA should be further expanded with higher wages and skilling of workers. More efforts should be made to promote financial inclusion, these efforts may lead to doubling of rural incomes, thereby enhancing gross national income per capita to $15000 by 2030. 

7. India must strive for reducing income inequality by progressive taxation and increasing minimum wages and providing social security to workers. Implementing a wealth tax of 2% on billionaires would be helpful in raising the standard of living of below 20% of the population by providing them with durable assets like affordable housing and gainful employment. 

8. To sum up, India can enhance its HDI to at par with China by 2030 through universal healthcare, better nutrition and sanitation and clean water, enhancing the enrolment in primary and secondary education, gender equity and boosting industrial growth, job creation or employment opportunities and reduction in inequality. More emphasis should be on research and development, artificial intelligence, robotics, space, defence production, quantum technology and crypto and bio engineering to reap the maximum benefits so that gross national income per capita is further enhanced. This will increase the standard of living of the people, thereby, increasing the human development index of India at par with China by 2030. 

Implications of India becoming the fourth largest economy in the world?

 Why is it in the news? 

1. According to the International Monetary Fund (IMF) and World Bank, India now ranks the fourth largest economy after the United States, China, and Germany. It has surpassed Japan. 

2. As of now, in 2025, the nominal GDP of the USA is $28 trillion , China $18 trillion, Germany$ 4.8 trillion. India $4.2 trillion. India is projected to become the third largest economy by 2027 surpassing Germany. However, there are challenges in the Indian Economy in areas like income inequality, job creation, inadequate educational and health facilities and lack of inclusive growth. 

Causes for the rise of Indian Economy 

1. The rise in the Indian Economy has been due to the consistent annual GDP growth of 6-8% over the past decade. Higher growth in the services, manufacturing, Fintech, Digital infrastructure and startups has boosted GDP growth. 

2. Secondly, since India has a young population having the median age of 28 years, thereby, providing a large and growing workforce. 

3. Thirdly, a rising middle class has increased demand for goods and services. 

4. India has witnessed structural reforms like GST, reforms in insolvency and bankruptcy code, digital India, Make in India, production linked incentives and improvement in ease of doing business. 

5. Financial inclusion through Jana Dhana Yojana, UPI and DBT has further increased economic participation of the masses. The robust growth in the services sector further boosted the Indian economy so much as it now contributes more than 50% of India’s GDP. India has become now a global player in software, AI, and digital services. Increased spending on infrastructure further led to the growth of Highways, Ports, Airports and digital connectivity leading to the cost reduction in logistics.  Rising foreign direct investments and indigenous capital investments further led to the investment and boosting of different sectors of the economy. 

Implications of India’s economic rise 

1. Greater strategic autonomy and global influence. India can assert greater strategic autonomy in foreign policy by balancing between the western powers like the US, EU and UK and other developed countries of the world on the one hand and Russia, China and Asian countries on the other. Moreover, India can assert more global influence on the UN Security Council, IMF , World Bank, WTO and World groupings like G-20, BRICS, QUAD and SCO. 

2. Counterbalance to China - India is emerging as a democratic counterweight to China in the Indo-Pacific region. India would be able to challenge China’s debt diplomacy by providing more economic aid to the littoral states of the Indian Ocean. India can now provide more development aid to third world countries. The vigorous economic assistance to these countries would catapult India as a global leader. 

3. A stronger economy would allow India higher defence spending. This would modernise further our military set up. 

4. Shift in global supply chains - As global firms seek alternatives to China, a robust Indian economy would attract more foreign investments. Sectors like electronics, pharmaceuticals, textiles and semi conductors would see greater investments. Further, most of the multinational companies operating in China would shift their location to India because of the comparative low wages and ease of doing business. Further, a rising Indian Economy would instill confidence among its policy makers and they would sign free trade agreements with countries like EU, Canada,and other developed countries, thereby expanding India’s access to new markets. India has already signed an FTA with Australia, UK and UAE.  A rising India may demand fair and inclusive globalisation and removal of protectionism. 

5. Emergence of a multipolar world - A rising India, would reduce the dominance of the US or China, thereby promoting a multipolar global order. It can assert the restructuring of global institutions like the UN security council, IMF, World Bank and WTO. It can act as a balancer in a polarised world. It can promote issue based coalitions rather than permanent blocks. 

6. Championing the global South - India can become the voice of the developing countries by advocating equitable climate finance, access to vaccines and technology, fair trade and development policies. With economic strength India will assert more effectively on global issues including border disputes with China, maritime security in the Indo Pacific,a bigger role in West Asia and Africa. It can effectively deal with the menace of terrorism. The recent operation Sindoor launched by India on 7th-10th May 2025 is an explicit example. The Indian airforce struck deep inside Pakistan and damaged various air bases and terror outfits. 

Challenges Ahead

1. There is  huge income inequality in India. According to estimates, India has become the most unequal society in the world. Top 10% of the people have amassed more than 50% of the wealth. 

2. There is acute unemployment ranging between 7-9%. It is to be noted that there is unemployment rate of 23% among youths between age 18-24 years. It is essential to provide employment opportunities to the youths so that India can reap the demographic dividends to the maximum. 

3. There are huge infrastructural gaps between the Urban and Rural areas. Rural areas suffer from power shortage. This may have an impact upon agricultural activities.

4. Global economic shocks on account of war between countries can disrupt the supply chain. Similarly, protectionism and especially the US tariff policy would have an impact upon the export of goods and services. 

5. Literacy rate in India is 74% according to the 2011 census. India currently spends 4.6% of GDP on education. It must be increased to 6-8% of GDP, focusing on science, technology, engineering and mathematics (STEM) and vocational training. There is a need to achieve 90% literacy and 50% higher education enrollment by 2040 from the present 27%. 

6. It is also necessary to increase healthcare spending from the present 2.1 % of GDP to 5% so that the poorest of the poor should get healthcare facilities. The present human development index of 0.644 should be increased to 0.768 of China’s level by 2040. Universal healthcare would boost workforce productivity. 

7. There is a need to accelerate urbanisation with affordable housing and job creation so that rural migrants are absorbed. 

8. There is also a need to increase female labour force participation from the present 23% to 60% as it obtains in countries like China, South Korea and Japan. 

9. Regional disparities must be tackled on priority basis to achieve equitable development in all states. It should be noted that the per capita income of Bihar is less than 5 times that of Delhi and 10 times that of Goa.

10. India must reverse the emigration of 1 million skilled workers annually by providing them a slew of incentives. 

Conclusion 

1. India has become the fourth largest economy of the world in nominal GDP. It is to become the third largest economy by surpassing Germany in 2027-28. In terms of purchasing power parity China is the biggest economy having $35 trillion followed by the US having $28 trillion and India $15 trillion. Thus, on the scale of economy, there is a huge difference between India and China. The Chinese economy is almost 4.5 times greater than the Indian economy. In PPP terms, the Chinese economy is 2.5 times greater than the Indian Economy. 

2. In order to catch the Chinese economy, India must maintain 7-8% annual GDP growth for the next 20 years, increasing the rate of productivity in agricultural and manufacturing, raising gross enrolment ratio in higher education from 27% to 50% by 2035, increasing the rate of urbanisation from the present 36% to 50% by 2040. It is necessary to reduce trade deficits by boosting exports and increasing the share of the manufacturing sector from the present 16-17% to 27-28% by 2035. 

3. We must note that the size of the economies of both India and China was the same in the 1980s. China opened its economy in 1979 under the leadership of Deng Hsiao Ping. It was because of the continuous 10% growth rate of China from 1980 to 2010 that the Chinese economy increased manifold and became the second largest economy in nominal GDP and the biggest economy in PPP terms. The reasons for high economic growth were 45% gross fixed capital formation, enhanced productivity and agriculture and manufacturing sector, export oriented growth and huge investments from indigenous capital and foreign. So, India must increase its gross fixed capital formation percentage from the present 32% to 40% by increasing saving rates, exporting more than importing, huge investments from foreign direct investments and indigenous investment and finally increasing productivity of agriculture and manufacturing sectors. The share of manufacturing in GDP of 17% must be enhanced to 26-28%. Similarly, the productivity in the agricultural sector must be increased from the present 4.2% to more than 5% by investing in research and development and by patenting new strains of high yielding varieties of seeds of wheat, rice, oilseeds, pulses, cotton, sugarcane and millets. 

4. India must strive to reduce income inequality, infrastructure gaps between urban and rural areas, increasing women’s participation in labourforce to 60%. 

5. India must expand its military power by doubling the present spending of $84 billion annually in order to catch $296 billion annual spending of China. 

To sum up , the GDP growth at 6.5% in 2024-25 must be enhanced in coming years by pumping huge investments from FDI and indigenous capital investment, reducing fiscal deficits below 5% of the GDP, promoting exports to reduce the trade deficit and skill upgradation to enhance labour productivity. It should be noted that the democratic resilience, one billion internet users by the end of 2025 to improve connectivity, digitalisation of the economy reinforced by computerization and cultural diversity are the unique advantages of India. Thus, India needs continued execution of sustained growth of its economy to achieve at par with China within 15-20 years.  

Advisory Power of the Supreme Court

 Why is it in the news?

1. In response to the timeline limits of 1-3 months on future bills for the Governor of a state to take action fixed by the Supreme Court in judgement on 8th April 2025, the President of India sought advice from the Supreme Court of India under article 143. The Supreme Court held that the Governor had three choices under article 200 of the constitution - To give assent to the bill passed by the state legislature, to withhold the bill and to reserve the bill for the consideration of the President of India. The court ruled that a Governor has a maximum of 1 Month to withhold assent on the aid and advice of the state cabinet. It held that a President has three months to reserve a bill for his consideration against the advice of the cabinet. The court further stated that a maximum of three months is given to return the bill with a message specifying reasons if the Governor withholds assent to the cabinet advice. It further held that a Governor must grant assent to a bill repassed by the state legislature under article 200 within a maximum of one month. The court ruled that a Governor cannot reserve a bill for the President’s consideration when the proposed law which was earlier rejected by him is presented for the second time by the state legislature. The court further warned that any failure by a Governor to comply with a timeline would invite judicial review. Thus, the court emphasised that the Governor cannot exercise its personal discretion if a house passes a same bill again and returns to him for consent. The top court ruled that the pending bill before the Governor for so many years was deemed to have been passed. 

2.Exercising powers vested upon the President of India under article 143 (1), the President made a 14 point reference to the Supreme Court for its consideration and opinion. This 14 Questions are as follows

• What are the constitutional options before a Governor under article 200?

• Is the Governor bound by the Council of Ministers advice under article 200?

• Is the Governor discretion under article 200 justiciable ?

• Does article 361 provide absolute immunity from judicial review of the Governors Action under article 200?

• Can judicial orders impose timelines for the Governor’s action under article 200?

• Is the President’s discretion under article 201 justiciable ?

• Can judicial orders impose timelines for the President’s action under article 201?

• Is the President required to seek Supreme Court advice under article 143 when a bill is reserved under article 201?

• Are decisions under articles 200 and 201 justiciable before a bill becomes law and can courts adjudicate a bill’s contents pre-enactment?

• Can article 142 substitute the constitutional powers of the President of the Governor?

• Is a state law valid without the Governor’s assent under article 200?

• Can substantial constitutional questions be referred to a five judge bench under article 145 (3)?

• Can article 142 override constitutional or statutory provisions?

• Is article 131, the exclusive jurisdiction for Union State disputes or can other jurisdictions like article 32 apply?

What is the advisory power of the Supreme Court?

1. The advisory jurisdiction of the Supreme Court under article 143 is a relic of the Government of India Act 1935. It vested the Governor General with the discretionary power to refer any question of law of public importance to the federal court for its opinion.  

2. A similar provision is available in various constitutions of commonwealth countries. In Canada, the Governor in Council may refer questions of public importance to the Supreme Court for its advisory opinions. In Pakistan, the constitution under article 186 allows the President to refer questions to the Supreme Court for advisory opinions. Similar provision with regard to seeking advisory opinion by the President from the Supreme Court obtains in the constitution of Sri Lanka. Approximately 20-25 countries have provision for a presidential reference, mostly from commonwealth countries. However the US Supreme Court consistently declined to provide any advisory opinion to an executive as it would violate the strict separation of powers envisaged in its constitution. 

3. As per article 143, the President may refer any question of law or fact of public importance to the Supreme Court for its opinion. The President makes such a reference based on the advice of the Union Council of Ministers. Article 145 of the constitution provides that any such reference shall be heard by a bench of minimum 5 judges.    

The  Supreme Court may provide its opinion after such hearing as it thinks fit. The opinion is not legally binding on the President and does not hold the precedential value  for the courts to follow subsequent cases. However, it carries a strong persuasive value and is usually followed by the courts and the executives. 

4. According to article 143(2), the President may refer to the Supreme Court with regard to disputes arising out of any pre-constitutional treaty, agreement, covenant, engagement , sanad or other similar instrument which is excluded from the original jurisdiction of the Supreme Court. It should be noted that in such cases, the Supreme Court must tender its opinion to the President. However, the President is not bound to accept the opinion of the Supreme Court in this regard. 

History of Presidential reference 

1. Since the implementation of the constitution on 26th January 1950, the President of India sought opinion of the Supreme Court 15 times

 on matters of public importance. 

2. The President sought the opinion of the Supreme Court on the validity of Delhi Laws Act 1912 concerning the scope of delegated legislation. The question was whether such delegation violated the separation of powers or exceeded legislative authority under the constitution. The court ruled that the delegated legislation is permissible as long as the legislature retains essential legislative functions and provides clear guidelines to the executives. The court cautioned against unchecked delegation and emphasised that the legislature cannot abdicate its core law making powers.  

3. The President of India referred the question regarding the Kerala education bill 1957 passed by the Kerala State legislature. The question referred to was whether provisions of the bill violate the rights of minorities under article 30? Could the state impose regulations on minority educational institutions without undermining their autonomy. The Supreme Court opined that the state has the authority to regulate educational institutions including those run by the minorities in the interest of educational standards and public welfare. However, such regulations must not destroy the minority character of the institutions or unduly interfere with their autonomy under article 30 of the constitution. 

4. In the Berubari case, the Government sought the opinion of the Supreme Court as to whether the Government could implement the agreement between India and Pakistan with regard to the transfer of the parts of Berubari to Pakistan in exchange for enclaves of Pakistan.  The question was whether Parliament had the authority to cede India territory without amending the constitution. The Supreme Court opined that a transfer of Indian territory to a foreign country or acquisition of new territories required constitutional amendment under article 368. 

5. In the Sea Custom Act, 1878, The President asked the opinion of the Supreme Court in 1962 as to whether the provisions of the Sea Customs Act violate the federal distribution of powers under the seventh schedule? Whether the Union's Power to regulate custom duties constitutionally valid? The Supreme Court opined that the Union has exclusive authority over custom duties and foreign trade under Union list of the seventh schedule. The court upheld the provisions of the Sea Custom Act.

6. In the Keshav Singh case (1964), the President sought the opinion of the Supreme Court as to whether the privileges of the state legislatures under article 194 override judicial authority or fundamental rights. The Court opined that legislative privileges are subject to the constitution including fundamental rights. The assembly could not claim absolute immunity to punish for contempt in a manner that violated judicial authority or individual rights. Thus, the Supreme Court resolved the conflict between the legislature and judiciary by ensuring that legislative privileges were not absolute and must align with fundamental rights and constitutional principles. 

7. In the Presidential election, 1974, the President of India referred the matter to the Supreme Court as to whether the Presidential election could proceed if there were vacancies in the electoral college due to dissolve state assemblies? The Supreme Court opined that the Presidential election could be held notwithstanding vacancies in the electoral college.   

8.  The President referred to the Supreme Court with regard to the special courts bill, 1978 proposed to establish special courts to try offences committed during the emergency. The bill aimed to expedite trials of political figures and others accused of abuses during the emergency. The President asked whether the establishment of the special courts was constitutionally valid. The Supreme Court upheld the validity of the bill. However, the court emphasised that such a court must adhere to natural justice, fair trial and judicial independence. 

9. In the Kaveri water dispute (1992) , the President referred the matter to the Supreme Court as to whether the Supreme Court had the jurisdiction to review or intervene in the tribunal's interim orders.  The Supreme Court opined that its jurisdiction could not be completely ousted even by the inter-state water dispute. The court refrained from modifying the tribunal's orders but clarified its supervisory role. It highlighted the importance of cooperative federalism in resolving interstate disputes.   

10. In the Ram Janm Bhumi Babri Masjid case (1993), the President sought the opinion of the Supreme Court as to whether there was a Hindu temple or religious structure at the site of the Babri Masjid before its construction? The court held that the question was politically sensitive and against the principle of secularism as it favoured one religious community over another. The court noted that answering such questions would not serve a constitutional purpose and could exacerbate communal tensions. The court deemed it unnecessary and superfluous.  

11. In the third judges case (1998), the President sought the opinion of the Supreme Court when the judgement in the second judges cases (1993) established the collegium system. The reference sought to address ambiguities in the appointment process for the Supreme Court and high court judges particularly the role of Chief Justice of India and the collegium. The Supreme Court clarified that the Chief Justice of India must consult  a collegium of senior judges (typically the 4 senior most judges of the SC) and that the executive’s role is limited to raising objections, not proposing names. The opinion emphasised judicial primacy in appointments while ensuring a consultative process. 

12.  In the Gujarat assembly election matter 2002, the President referred to the Supreme Court as to the authority of the ECI to decide the timings of elections under article 174 and article 324. The question was could the state government override the decision of the election commission of India. The court ruled that the decision of the election commission of India on election timing was final provided that it was based on reasonable grounds of ensuring free and fair elections. The state government could not compel early elections against the ECI’s assessment. 

13. In the Punjab Termination of Agreements Act,2004, the President sought the opinion of the Supreme Court when the Punjab state legislature enacted the Punjab Termination of Agreement Act 2004 which sought to terminate water sharing agreements with Haryana related to Sutlej Yamuna link canal. The President asked the Supreme Court whether the said Punjab termination of agreements Act 2004 constitutionally valid? Could a state unilaterally terminate inter-state agreements without violating federal principles? The Supreme Court held that the said Punjab Act was unconstitutional as it violated the principles of federalism and the sanctity of inter-state agreements. Thus, the Act was struck down and Punjab was directed to adhere to the water sharing agreements.

14. In the Gujarat Gas Act, 2012, the President of India referred to the constitutional validity of Gujarat gas (regulation of transmission, supply and distribution) Act, 2001. The question arose from disputes over whether states could legislate on natural gas which fails under the union list of the seventh schedule. Was the state legislation ultra vires the constitution? The Supreme Court opined that only the Union Government could legislate on natural gas, thereby nullifying conflicting state laws. The opinion of the Supreme Court re-enforced the Union Government's exclusive authority over critical resources like natural gas. Thereby, clarified federal divisions of power. 

15. In the 2G spectrum case (2012), The president sought the opinion of the Supreme Court when it cancelled 122 telecom licenses in the 2G spectrum scam, citing irregularities in allocation. The Government asked whether auction was the only permissible method for allocating natural resources? Could the government adopt other methods like first come first serve for resource allocations without violating the constitution? The Supreme Court opined that auctions are not a constitutional mandate for all natural resource allocations. The method of allocation depends on the nature of the resource and public interest but it must be transferred, fair and non-arbitrary. The court emphasised that the state, as a trusty of natural resources, must follow principles of equality and public trust. 

16. In the national judicial appointment commission, NJAC 2015 - when the Supreme Court struck down the national judicial appointment commission acts 2014 and the 99th constitutional amendment in 2015 declaring them unconstitutional for violating judicial independence and the basic structure of the constitution, the President referred the Supreme Court as to whether the collegium system could be reformed to enhance transparency and accountability. The Supreme Court declined to provide a detailed advisory opinion. It reaffirmed the primacy of the collegium system in judicial appointments. 

17. In the Tamil Nadu Governor case, 2025, the President referred the matter to the Supreme Court on 13th May 2025 when the two judge bench set the timeline for giving assent to the bill passed by the State Legislature by the Governor and the President of India. The court invoked article 142 to deemed the bills as having received assent. The reference sought clarity on the authority of judiciary to impose timelines and justiciability of gubernatorial and presidential actions. The President listed 14 points of reference to the Supreme Court. The decision of the Supreme Court is still awaited. 

Conclusion 

Presidential references under article 143 have played a critical role in clarifying constitutional ambiguities and resolving complex issues of public importance in India. These references made by the President of India to the Supreme Court have shaped India’s constitutional jurisprudence; balance the powers of the legislature, executive and judiciary; upheld the principles of federalism and fundamental rights. However, the Supreme Court is not bound to give opinion on matters referred to by the President if the questions sought are vague, hypothetical or political in nature.