Finance Minister Nirmala Sitharaman presented the Economic Survey 2024-25 today. The Economic Survey, prepared by the Chief Economic Adviser (CEA), offers an official evaluation of the country’s economic performance for the current financial year while outlining the key challenges facing the nation.
ETCFO brings you the essential highlights of the Economic Survey.
India’s Projected Growth for FY26
India’s economy is projected to maintain a steady growth trajectory, with a forecasted growth rate of 6.3% to 6.8% in FY26, as outlined in the Economic Survey 2025. Chief Economic Advisor (CEA) V. Anantha Nageswaran emphasized that while the country is on a “steady growth path,” globalisation is retreating, which presents both challenges and opportunities for future growth. To maintain this growth momentum, India will need to leverage its demographic dividend through deregulation measures, ensuring long-term sustainability and resilience.
India’s Strong Macroeconomic Foundations
Despite global economic uncertainty, the survey underscores that India’s macroeconomic health remains solid, driven by strong balance sheets in the domestic corporate and financial sectors. Nageswaran pointed out that these fundamentals, combined with fiscal consolidation and steady private consumption, will provide a sturdy base for the country’s growth. However, the retreat of globalisation and a more insular international environment pose potential risks.
Growth in H1 FY25: Agriculture and Services Lead the Charge
The survey highlighted a 6.2% growth in real Gross Value Added (GVA) for the first half (H1) of FY25. While Q1 FY25 experienced robust growth of 8.3%, growth moderated in Q2 FY25, largely due to challenges faced by the industrial sector. Key sectors driving growth during this period included agriculture and services. The manufacturing sector, on the other hand, experienced slower growth due to a global demand slowdown and supply chain disruptions.
Factors Contributing to Q2 Slowdown
The Q2 slowdown can be attributed to three primary factors:
1. Declining manufacturing exports due to weakened demand from major trading nations and aggressive trade policies.
2. The monsoon season, which, while supporting agriculture, disrupted sectors like mining, construction, and certain parts of manufacturing.
3. The timing differences of festivities between September and October in FY24 and FY25, leading to a dip in growth during Q2.
India’s GDP Growth in FY25: A Mixed Performance
India’s GDP growth showed contrasting performances in the first half of FY25. In Q1 FY25, the real GDP grew by 6.7%, while growth slowed to 5.4% in Q2 FY25. Overall, the first half of FY25 saw a real GDP growth of 6%, indicating some moderation in the growth rate despite a positive start.
Strong Performance in Global IPO Listings
India’s position in global primary resource mobilization has significantly strengthened, with its share in global IPO listings soaring to 30% in 2024, up from 17% in 2023. This surge underscores India’s rising prominence in the international financial landscape. Over the long term, India’s stock markets have been among the world’s best performers, with the Nifty 50 index achieving a compounded annual return of 8.8% over the past decade.
India’s Long-Term Growth Aspirations
For India to meet its aspirations of becoming a developed nation (Viksit Bharat) by the centenary of its independence, the country needs to achieve an average annual growth rate of 8% over the next couple of decades. This ambitious target is necessary to uplift living standards and bridge the development gap. However, experts note that global political and economic factors will play a critical role in determining whether India can achieve this goal.
Outlook and Global Comparisons
India’s strong economic performance has been driven by several factors, including digital infrastructure, profitability growth, and significant reforms. The country’s weight in the MSCI Emerging Markets (EM) index reached 19.4% by December 2024, reflecting its growing importance in the global economy. Despite outperforming global benchmarks such as China’s Shanghai Composite, India still trails behind the US NASDAQ and Dow Jones indices in terms of returns.
While the economic outlook remains positive, the challenge lies in navigating the complex global landscape. As Nageswaran said, while the growth rate target is desirable, India must prepare for potential global disruptions that could affect its growth trajectory in the coming decades.
The Economic Survey paints a cautious yet optimistic picture for India’s future, calling for prudent policy interventions to harness the country’s full potential in an increasingly uncertain global environment.
Labour Reforms Foster Business-Friendly Environment
The Economic Survey 2024-25 highlighted the success of labour reforms that have fostered a business-friendly environment while ensuring worker rights. These reforms aim to create a “virtuous cycle of job creation”, contributing to sustainable employment growth and promoting economic inclusivity. By striking a balance between the ease of doing business and workforce protection, these reforms are expected to play a pivotal role in India’s long-term growth.
Rural Demand Set to Strengthen
The Economic Survey predicts that rural demand will strengthen, fueled by a rebound in agriculture, easing food inflation, and a stable macroeconomic environment. These factors are expected to boost near-term growth prospects and contribute to the overall recovery of the economy. However, the survey also cautioned that geopolitical tensions, trade uncertainties, and potential commodity price shocks could pose risks to economic stability, which might undermine growth.
Private Transfers and Remittances: Strengthening India’s Economic Resilience
According to the Economic Survey, private transfers, mainly driven by remittances from Indians employed overseas, formed the bulk of net transfers to the country. These transfers grew steadily from USD 28.1 billion in Q2 FY24 to USD 31.9 billion in Q2 FY25, reflecting the continued strength of India’s diaspora and robust remittance inflows. Despite global economic uncertainties, India’s remittance inflows remain strong, contributing significantly to the nation’s economic resilience.
Employment Generation and High Electricity Costs
The Chief Economic Advisor (CEA) highlighted the critical role of employment generation in India’s economic growth. He emphasized that fostering job creation is essential for the country’s progress, especially in the context of global economic competition.
The CEA also pointed out a significant challenge faced by Indian businesses: the high electricity markup rates imposed by many states. These elevated rates put Indian industries at a disadvantage, particularly when compared to countries like Vietnam and Bangladesh. For instance, in Vietnam, electricity costs are more favorable to industries, providing them with a competitive edge by lowering energy expenses for businesses in comparison to India.
India’s Infrastructure Progress: Key Developments
The Chief Economic Advisor (CEA) praised India’s infrastructure development over the past decade, acknowledging significant advancements across various sectors.
He highlighted the introduction of new trains and airports, along with notable improvements in port efficiency, with turnaround time decreasing from 48 hours to 30 hours in recent years. The CEA also emphasized key achievements such as capacity additions in the power sector, a reduction in data costs, and the expansion of telecom infrastructure, all contributing to India’s growing infrastructure capabilities.
