Economic Survey 2024-25 highlights balanced growth prospects for India
While the Survey acknowledges potential headwinds such as geopolitical uncertainties, trade disruptions, and possible commodity price shocks, it also highlights several domestic growth drivers.
Nirmala Sitharaman, Union Minister of Finance and Corporate Affairs, presented the Economic Survey 2024-25 in Parliament today, offering a balanced outlook on India’s economic prospects for FY26. While the Survey acknowledges potential headwinds such as geopolitical uncertainties, trade disruptions, and possible commodity price shocks, it also highlights several domestic growth drivers. A key focus will be on translating the order books of the private capital goods sector into sustained investments, improving consumer confidence, and ensuring a steady rise in corporate wages. Additionally, a rebound in agricultural production, easing food inflation, and a stable macroeconomic environment are expected to support near-term growth. However, the Survey emphasizes the need for grassroots-level structural reforms and deregulation to enhance India’s global competitiveness in the medium term.
The global economy grew by 3.3 per cent in 2023, and the International Monetary Fund (IMF) projects an average growth rate of 3.2 per cent over the next five years. The Economic Survey notes that while the global economy showed steady but uneven growth in 2024, certain regions experienced a slowdown, particularly in manufacturing across Europe and parts of Asia. Supply chain disruptions and weak external demand affected industrial production, whereas the services sector performed relatively well, sustaining growth in several economies. Inflationary pressures eased in most regions, but services inflation remained persistent.
Despite these global challenges, India has demonstrated steady economic growth, with a real GDP growth projection of 6.4 per cent for FY25, close to its decadal average. The industrial sector grew by 6 per cent in the first half of FY25 and is expected to reach 6.2 per cent by year-end. However, growth moderated in the second quarter due to three key factors. First, manufacturing exports slowed due to weaker demand from destination countries and aggressive trade and industrial policies by major trading partners. Second, the above-average monsoon had a mixed impact—while it replenished reservoirs and benefited agriculture, it disrupted mining, construction, and parts of the manufacturing sector. Third, a variation in the timing of festivals between September and October affected consumer activity, leading to a temporary slowdown.
The Survey notes that India requires to assess the situation and develop a forward looking strategic trade roadmap that leverages its strengths. India is in a process of negotiating a number of Free Trade Agreements with countries and trading blocks. For example, in the textile sector, the UAE-India Comprehensive Economic Partnership Agreement (CEPA) (2022) has helped reduce India’s textile tariffs with a significant market. India is actively working towards negotiating trade deals with top importers such as the EU and the UK. The Survey notes that India is also adopting the strategy to diversify its export basket and target new markets.
Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant sector of the Indian economy, noted the Survey. To provide equity funding to MSMEs with the potential to scale up, the government launched the Self-Reliant India Fund with a corpus of Rs 500 billion.
The Survey highlights that capital expenditure (capex) as a percentage of total union expenditure has steadily increased since FY21. Following the general elections, government capex saw an 8.2 per cent year-on-year increase between July and November 2024. Meanwhile, gross tax revenue (GTR) grew by 10.7 per cent year-on-year during April–November 2024, but the tax revenue retained by the Union government after state devolution saw only marginal growth. Despite this, deficit indicators remained well-positioned, leaving sufficient fiscal space for further developmental and capital investments.
The Indian government continues to push for renewable energy expansion and green investments through various schemes and policies, including PM-Surya Ghar: Muft Bijli Yojana, the National Bioenergy Programme, the National Green Hydrogen Mission, and PM-KUSUM. With significant capacity additions in solar and wind power, India’s renewable energy sector saw a 15.8 per cent year-on-year increase in capacity by December 2024.
A key takeaway from the Survey is the emphasis on reducing excessive regulatory burdens to enhance business efficiency, lower operational costs, and unlock new growth opportunities. The Survey outlines a three-step framework for states to systematically review regulations: identifying areas for deregulation, comparing existing policies with other states and countries, and assessing the cost impact of these regulations on businesses. The report also underscores the importance of Ease of Doing Business (EoDB) 2.0, which should be a state-led initiative focusing on simplifying standards, setting legal safeguards for enforcement, reducing tariffs and fees, and implementing risk-based regulations.
Overall, the Economic Survey 2024-25 presents a positive outlook for India’s economic trajectory, acknowledging global and domestic challenges while highlighting the country’s resilience. With a focus on investment-driven growth, rural demand recovery, renewable energy expansion, and regulatory simplification, India remains well-positioned for sustained economic progress and global competitiveness.
