The Economic Survey 2024-25, tabled in Parliament by Union minister of finance and corporate affairs Nirmala Sitharaman forecasts India’s gross domestic product (GDP) growth for FY25-26 to range between 6.3% and 6.8%. Despite global economic uncertainties, India has maintained a steady growth trajectory, supported by resilient domestic demand and structural reforms, the finance minister (FM) says.
India’s economic trajectory for FY25-26 remains optimistic yet cautious, with key challenges including global trade uncertainties and potential commodity price shocks. The Survey emphasises the need to strengthen private investment and consumer confidence, enhance agricultural productivity to sustain rural demand and improve global competitiveness through structural reforms.
With continued infrastructure development, financial stability and strategic policy measures, India is poised to maintain its position as one of the fastest-growing major economies in the world, the FM says.
Global Economic Context
The Survey highlights that the global economy grew by 3.3% in 2023, with the International Monetary Fund (IMF) projecting an average growth of 3.2% over the next five years. Global manufacturing slowed, particularly in Europe and Asia, due to supply chain disruptions and weak external demand, while the services sector outperformed expectations. Inflationary pressures have generally eased, but services inflation remains persistent.
India’s Economic Performance
India’s real GDP growth of 6.4% in FY24-25 remains close to the decadal average. The key contributors to economic growth include:
• Private Final Consumption Expenditure: Estimated to grow by 7.3%, driven by a rebound in rural demand.
• Gross Value Added (GVA) Growth: Expected to reach 6.4% in FY24-25, with robust growth across major sectors:
o Agriculture: Projected to grow 3.8%, supported by strong Kharif production and above-normal monsoons.
o Industry: Estimated growth of 6.2%, bolstered by construction and utilities expansion.
o Services: Expected to grow at 7.2%, with strong performance in financial services, real estate, public administration, and defence.
Sectoral Insights
Agriculture
Growth remained steady in the first half of FY24-25, recording 3.5% in Q2.
Kharif food grain production reached a record 1,647.05 lakh metric tonnes (LMT), a 5.7% increase from 2023-24.
Industrial Sector
Grew by 6% in H1 FY24-25, projected to reach 6.2% for the full fiscal year.
Manufacturing exports slowed due to weak demand and global trade uncertainties.
Construction activities remained strong, driven by infrastructure investments.
Services Sector
Recorded 7.1% growth in H1 FY24-25, with all sub-sectors performing well.
Services exports surged by 12.8% in April–November FY24-25, up from 5.7% in FY24.
Macroeconomic Stability and Fiscal Outlook
Inflation: Retail inflation softened from 5.4% in FY23-24 to 4.9% in April–December 2024. Food inflation, however, increased to 8.4%, primarily due to rising vegetable and pulse prices.
Fiscal Health: The gross tax revenue increased by 10.7% Y year-on-year (y-o-y, while capital expenditure (capex) grew by 8.2% y-o-y from July–November 2024.
Banking Sector: Gross NPAs (non-performing assets) declined to a 12-year low of 2.6%, and the capital-to-risk-weighted assets ratio (CRAR) stands at 16.7%.
External Sector and Investment Trends
Merchandise exports grew by 1.6% YoY, while imports rose by 5.2%.
Foreign direct investment (FDI) inflows rose by 17.9% in FY24-25, reaching US$55.6bn (billion).
Forex reserves increased to US$704.9bn in September 2024 before moderating to US$634.6bn in January 2025.
Remittances remained strong, keeping the current account deficit (CAD) contained at 1.2% of GDP in Q2 FY24-25.
Employment and AI-Driven Growth
India’s unemployment rate has declined from 6% in 2017-18 to 3.2% in 2023-24.
The Survey emphasises the potential of AI to boost economic growth, highlighting the need for education and skill development.
Infrastructure and Renewable Energy Investments
In April–November 2024, 2,031km (kilometres) of railway tracks commissioned
Port efficiency improved, reducing container turnaround time from 48.1 hours in FY24 to 30.4 hours in FY24-25.
Renewable energy capacity increased by 15.8% y-o-y, with key initiatives like PM Surya Ghar, National Green Hydrogen Mission and PM-KUSUM driving investments.
Social Services and MSME Support
Government social services expenditure has grown at a 15% CAGR (compounded average growth rate) from FY20-21 to FY24-25.
Health sector investment rose, with government spending on health increasing from 29% in FY14-15 to 48% in FY21-22.
The MSME (micro, small and medium enterprises) sector continues to thrive, supported by initiatives like the Rs50,000 crore Self-Reliant India Fund.
Way Forward: Structural Reforms and Deregulation
The Survey emphasises systematic deregulation under ease of doing business (EoDB) 2.0, urging state governments to reduce excessive regulatory burdens and foster a competitive SME (small and medium enterprise) sector.
Key recommendations include:
• Deregulation of industries to enhance efficiency.
• Risk-based regulatory frameworks to lower compliance costs.
• Encouraging grassroots-level economic reforms for long-term growth.
