Swadeshi call and the Goldilocks myth

India is on the march to become the world’s third-largest economy. In a recent address, Prime Minister Narendra Modi reaffirmed that amid global instability, India must remain focused on its economic priorities. His remarks came a day after the US President labelled India “a dead economy” while announcing a 25% tariff on Indian imports. Addressing traders and shopkeepers, the Prime Minister urged, “At a time when the world is going through uncertainty, let us take a pledge to sell only Swadeshi goods from our shops.” Promoting ‘Made in India’ output, he said, is the truest service to the nation.

India’s strategy to leverage its domestic market, turning MSMEs inward, makes sense, but only if the macroeconomic environment supports robust middle-income consumption. A closer look at the latest data reveals worrying trends across demand, incomes, and growth fundamentals. While India’s headline CPI inflation cooled to 2.82% year-on-year in May 2025, the lowest since early 2019, this apparent success masks considerable volatility beneath the surface. Food inflation, which constitutes nearly half the average household’s spending basket, dropped from 10.87% in October 2024 to 0.99% by May 2025. But this sharp fall follows months of intense strain. In real terms, a family trying to plan their grocery budget has endured swings that destabilise purchasing power and eating habits, even if headline numbers appear tamed. Volatility, in itself, is a form of economic insecurity.

Even when prices stabilise, the damage from earlier spikes persists. The impact is not merely arithmetic; it is emotional and social. Families substitute protein with starch, defer healthcare, and reduce schooling-related costs. These are choices made not in policy briefings but in kitchens and classrooms. This fragility, if unacknowledged, renders macroeconomic optimism hollow.

Meanwhile, real wages continue to lag. While average salary hikes have stayed in the 6 to 9% range, real wage growth has varied from as low as -0.4% in 2020 to 4% in 2025. In key industries such as manufacturing, FMCG, and IT, wage growth is increasingly outpaced by inflation. For most workers, a 9% raise quickly loses meaning when grocery bills, school fees, and rent consume nearly all of it. Incomes rise, but aspirations stall.

This disconnect between growth and lived experience breeds what economists call a “silent squeeze”, a situation where households are technically earning more but are feeling poorer. The erosion in real purchasing power leads to reduced discretionary spending, rising debt reliance, and long-term stress, especially among the lower middle class and urban youth. Sectors like engineering, infrastructure, and consumer services have reported the lowest effective salary gains. Without sustained growth in real income, India’s consumption engine, arguably its greatest internal strength, remains constrained.

While some policymakers cite improving income inequality metrics, such as the marginal fall in the Gini coefficient for taxable income, these figures are misleading. They exclude the vast informal sector and do not reflect asset-based inequality, which has only grown. The apparent narrowing of the income gap within the formal tax net tells us little about the widening chasm between the salaried class and the ultra-wealthy, or between urban professionals and informal workers. Inequality today is not just about money; it is about access to quality healthcare, digital tools, education, and opportunity.

Further complicating the picture is the fiscal space where the government operates. The fiscal deficit for 2025-26 is targeted at 4.4%of GDP, and revenue deficit at 1.5%. These are steps towards consolidation, but they also reflect constraints. India’s gross borrowings are estimated at Rs 14.8 lakh crore, and the public debt-to-GDP ratio remains close to 57% in 2024-25. While such borrowing may be necessary for infrastructure and welfare spending, it limits room for future countercyclical measures. In effect, the State has less freedom to cushion shocks, whether from global demand collapses or climate disruptions.

Growth beyond GDP

This narrow fiscal bandwidth also inhibits deeper investment in critical public services, health, education, and urban infrastructure; at the moment, they are needed most. As urbanisation accelerates and climate threats multiply, India cannot afford a growth path that is numerically sound but socially brittle.

What emerges is a picture far removed from the harmonious balance implied by the term ‘Goldilocks’. The Indian economy today is growing, but not equitably. Inflation is falling, but its aftershocks linger. Fiscal policy is disciplined, but constrained. Incomes are rising, but unevenly. This dissonance between macroeconomic aggregates and ground-level realities is more than a statistical glitch; it is the central economic challenge of our time.

The discourse around a ‘Goldilocks’ economy often focuses on alignment between growth, inflation, and interest rates. But equilibrium on paper cannot mask disequilibrium in society. The aspirational promise of a “just right” economy cannot be fulfilled unless the foundations, demand, income distribution, real wages, and fiscal capacity are strong and inclusive. Rhetoric on self-reliance must be accompanied by the material ability of people to rely on themselves. Otherwise, a call to sell Swadeshi becomes symbolic, not structural.

India’s path to long-term prosperity lies not in chasing flattering economic labels but in accepting the complexity of its present and committing to correcting its contradictions. That means investing not just in roads and ports, but in human capital and income stability. It means reframing success beyond GDP growth and anchoring it in the lived experience of the majority. Unless these difficult truths are acknowledged and addressed at the highest policy levels, the idea of India as a self-sustaining, internally resilient economy may remain a slogan rather than a strategy. And the myth of a macroeconomic sweet spot, like the Goldilocks tale itself, will belong more to fiction than to the future.

(Deepanshu is a professor of economics at the Jindal School of Liberal Arts and Humanities, O P Jindal Global University; Ankur is a research analyst at the university’s Centre for New Economics Studies)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.