Economic Survey: India's Growth Momentum Holds, But Inflation & Trade Risks Loom For FY25, real GDP is estimated to grow at 6.4 per cent, close to India's decadal average. The economy has remained resilient despite global headwinds like supply chain disruptions and weak external demand. However, global manufacturing is slowing, and India's export growth, while positive, is still below pre-pandemic levels
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The Indian economy is expected to grow between 6.3 per cent and 6.8 per cent in FY26, according to the Economic Survey 2024-25 presented by Finance Minister Nirmala Sitharaman in Parliament today. While the overall outlook remains stable, several challenges, including inflation, global trade uncertainties, and structural issues, could impact growth.
For FY25, real GDP is estimated to grow at 6.4 per cent, close to India's decadal average. The economy has remained resilient despite global headwinds like supply chain disruptions and weak external demand. However, global manufacturing is slowing, and India's export growth, while positive, is still below pre-pandemic levels.
Investment, exports, and infrastructure drive growth
Government-led capital expenditure (capex) has grown by 8.2 per cent between July and November 2024, with further acceleration expected in the coming months. India's total exports rose 6 per cent year-on-year between April and December 2024, driven by a strong performance in the services sector.
Foreign direct investment (FDI) inflows also saw a significant boost, increasing from USD 47.2 billion in FY24 to USD 55.6 billion in FY25, marking a 17.9 per cent growth.
"The global economy grew by 3.3 per cent in 2023. The International Monetary Fund (IMF) projects global growth to average around 3.2 per cent over the next five years, which is modest by historical standards," says Nirmala Sitharaman, Union Minister of Finance and Corporate Affairs while presenting the Economic Survey 2024-25 in the Parliament today.
Inflation eases, but food prices remain a concern
Retail inflation softened to 4.9 per cent, but food inflation increased to 8.4 per cent due to rising prices of vegetables and pulses. The RBI expects inflation to align with the 4 per cent target by FY26, but price fluctuations in essential commodities could impact household budgets and rural demand.
Industrial growth faces hurdles
The industrial sector is projected to grow by 6.2 per cent in FY25, but Q2 data showed a slowdown due to weak exports, monsoon-related disruptions, and shifting festive demand.
Also, the regulatory bottlenecks continue to hamper ease of doing business, which affects long-term industrial expansion.
However, infrastructure development remains a key priority, with continued investments in roads, railways, ports, and renewable energy projects. Capacity additions in solar and wind power grew by 15.8 per cent year-on-year in December 2024, reflecting India's commitment to sustainable growth.
Unemployment down, but job quality a concern
The unemployment rate has fallen to 3.2 per cent in 2023-24 from 6 per cent in 2017-18. However, questions remain about job quality and wage growth. Many jobs are in the informal sector, and real wage growth has been slow. The report stresses the need for skill development, especially in the face of AI-driven workplace changes.
Banking and fiscal health show improvement
The banking sector has stabilized, with NPAs at a 12-year low of 2.6 per cent. However, the tax revenue retained by the Union government has barely increased, limiting room for new fiscal initiatives. The Survey highlights that state revenue expenditures are rising, with subsidies growing at 25.7 per cent, raising concerns about fiscal sustainability.
While India's economic projections are optimistic, challenges like global uncertainties, inflation risks, and uneven private investment could impact future growth. Additionally, tomorrow, the Finance Minister will present the first full budget of the Modi 3.0 government amid expectations of income tax slabs, allocation for infrastructure sector, emerging technologies and rural development.
