India can be a $8 trillion economy by 2035, but there are 4 major hurdles: Nandan Nilekani's report explains

India is moving towards becoming an $8 trillion economy by 2035, but it must overcome major challenges, according to ‘The Great Unlock: India in 2035’ report by Nandan Nilekani , co-founder and chairman of Infosys and Arkam Ventures.

The study highlights four major hurdles: rising income disparity, low levels of formalisation, limited market access, and low productivity. India’s growth remains concentrated, with only 13 out of 788 districts contributing to half of the nation’s GDP.

Income inequality is significant, with the top 10 per cent of the population accounting for nearly 60 per cent of total income. Around 200 million workers continue to migrate from poorer states in search of better opportunities.

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Labour productivity remains a major concern. India’s productivity is only about $7 per hour, roughly one-tenth of the United States. About 85 per cent of the workforce remains in the informal sector, and most MSMEs lack formalisation, making access to credit and growth difficult.

Despite these hurdles, the report is optimistic about India's prospects, largely driven by the country's rapid digital transformation . Infrastructure such as Aadhaar, UPI, and the Account Aggregator system have significantly strengthened the economy’s digital backbone.

Monthly digital transactions have skyrocketed from zero to 16 billion, while Aadhaar-enabled services have slashed identity verification costs from $23 to just 50 cents, according to ANI.

The report also noted that the combination of AI and Digital Public Infrastructure (DPI) is set to connect the next billion Indians. Efforts are underway to build AI models in Indian languages, lowering costs and making digital services more accessible to farmers, MSMEs, and students, thereby improving productivity and market access.

By 2035, it is projected that half of India’s workforce will be "AI-native," and women's participation in the workforce is expected to rise sharply from 25 per cent to 47 per cent. India's digital revolution is not only creating new jobs but also formalising employment across both rural and urban regions.

To sustain this momentum, the report stressed that India must focus on improving capital access, supporting small businesses, promoting AI usage, and making land and property assets easier to monetise.

Adding further perspective, a separate report by Ionic Wealth by Angel One pointed out that India's export potential remains untapped due to low labour productivity and gaps in high-tech infrastructure.

Despite becoming the world's fifth-largest economy, India ranks only 8th in global merchandise exports, highlighting that persistent bottlenecks continue to limit growth.

Nonetheless, strong investment flows, increasing FDI, and new sectors like EVs, electronics, and green energy are offering positive signs for the future. India's Purchasing Managers' Index (PMI) also remains robust among key Asian economies, indicating strong manufacturing momentum.

If key challenges are addressed, India’s digital economy could unlock massive growth, setting the country firmly on the path to becoming an $8 trillion economy by 2035.