India's economy is projected to demonstrate promising growth even amid global economic uncertainties, as evidenced by the recently presented Economic Survey for the fiscal year 2024-2025. On January 31, 2025, Union Finance Minister Nirmala Sitharaman unveiled the survey during the Budget session of Parliament, offering insights and projections pivotal for the nation's financial future.
The prominent takeaway from the Economic Survey is the forecast for India's real GDP to grow by 6.4% for FY25. This is noteworthy as it stays consistent with the decadal average, signaling strong economic fundamentals. Notably, all sectors are contributing positively to this growth rate, highlighting the resilience of the economy.
The agricultural sector, often termed the backbone of India's economy, is maintaining strength, consistently operating above trend levels. The report indicated, "The agriculture and allied activities sector has long been the backbone of the Indian economy...". This sector remains instrumental, contributing approximately 16% to the nation's GDP.
Meanwhile, the industrial sector has found its footing above pre-pandemic levels, achieving growth driven by increased electricity demand and construction activities. The services sector, too, has bounced back, approximated to be at its long-term growth trends, showcasing the comprehensive recovery across the economy.
Inflation control remains another highlight. Retail inflation has dropped from 5.4% during FY24 to 4.9% from April to December 2024. This decline stems from various initiatives, including government policies aimed at stabilizing prices. Sitharaman confirmed, "Retail headline inflation has softened from 5.4% in FY24 to 4.9% in April – December 2024." This control over inflation is expected to pave the way for stable consumption patterns moving forward.
Foreign Direct Investment (FDI) has also shown signs of revival, with gross inflows jumping from $47.2 billion during the first eight months of FY24 to $55.6 billion during the same period of FY25, reflecting year-on-year growth of 17.9%. This influx is seen as pivotal for enhancing the investment environment and boosting economic health.
On the trade front, exports witnessed steady growth, marking a 6% increase over recent months. The survey pointed out, "Overall exports have grown steadily...witnessing a YoY growth of 6%." This positive trend can be attributed to the diversification of export markets and improvements led by key government initiatives.
One of the survey's key recommendations is focused on deregulation, emphasizing its necessity for achieving the government’s vision of "Viksit Bharat" (Developed India). Emphasizing the importance of economic freedom, Sitharaman stated, "Deregulation is the key to achieving the goal of 'Viksit Bharat'..." This aspect stresses the need for structural reforms to alleviate burdens on businesses, thereby enhancing investment and operational efficiencies.
Another area of concern addressed by the survey is gender disparity within the workforce. It pointed out the increasing participation of rural women, with the female labour force participation rate climbing from 23.3% in 2017-18 to 41.7% in 2023-24. Despite these advances, the survey highlights existing income disparities, stressing the need for focused interventions to support women's economic contributions.
The Economic Survey also flags potential risks linked to international trade policies, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), which could impact India's trade standings. Concerns around the 'carbon tax' were highlighted, stressing the need for India to navigate these challenges effectively.
On the infrastructure front, the survey noted significant progress with capital expenditures increasing significantly from prior financial years. This upward trend is backed by the government's commitment to infrastructure development post-elections, with expectations of long-term growth supported by active private sector participation.
Financial stability indicators remain positive as well, with the banking sector reporting steady credit growth and declining non-performing asset ratios, which stood at 2.6% by September 2024. This stabilization is fundamental as it fosters greater confidence among investors and consumers alike.
Looking forward, GDP growth for FY26 is projected to range between 6.3% and 6.8%, continuing the trend set by FY25. The report underscored the optimism surrounding India's economic outlook, keeping pace with global economic challenges. President Droupadi Murmu highlighted India's significant role by stating the nation contributes to 15% of global growth, emphasizing its importance on the world stage.
Overall, the Economic Survey 2025 provides insight not only on the current state of India's economy but also sets forth the roadmap leading to sustainable growth. The emphasis on foundational reforms, gender inclusivity, and infrastructural investment paves the path for future development, positioning India on course to emerge as one of the world's leading economies.