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Informist, Friday, Jan. 31, 2025

NEW DELHI – The Economic Survey for 2024-25 (Apr-Mar), tabled in Parliament by Finance Minister Nirmala Sitharaman on Friday, has projected India's real GDP growth at 6.3-6.8% for 2025-26 (Apr-Mar), against the four-year low growth of 6.4% growth estimated last year.

The last Economic Survey, which was released in July, had pegged the GDP growth for FY25 at 6.5-7.0%. The economy, however, is estimated to have grown at a slower pace this year because of low government capital spending and moderating urban consumption.

Economists expect India's GDP growth to recover in FY26 on expectations of higher capital spending by the government and improving rural consumption. Earlier this month, the World Bank had said it expects the Indian economy to grow 6.7% in FY26. The International Monetary Fund projects India's GDP to grow 6.5% next year.

"There are many upsides to domestic investment, output growth and disinflation in FY26. There are equally strong, prominently extraneous, downsides too," the Economic Survey said. "Nonetheless, the fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption."

Rural demand has been rebounding recently, which augurs well for the overall consumption in the country, the survey said. The recovering rural demand backed by a rebound in agricultural production, an anticipated easing of food inflation, and a stable macro-economic environment provide an upside to near-term growth, it said.

Investment activity is expected to pick up, supported by higher public capital expenditure and improving business expectations. The government's capital expenditure slowed down in FY25 because of election-related restrictions. While capital spending picked up after the General Election, the progress of work remained slow due to "unusual patterns of the last monsoon season", the survey said. It added that the slowdown in investment activity is likely temporary, and green shoots in capital formation are visible.

"Capacity utilisation in manufacturing remains above the long-term average, and private sector order books have shown steady growth, alongside a rise in investment intentions," the survey said. "However, these gains could be tempered by the global excess capacities in sectors such as steel, leading to aggressive trade policies in search of demand."

High geopolitical and trade uncertainties and possible commodity price shocks globally remain headwinds to growth in India, the survey said. While India's economic prospects for FY26 are balanced, the country needs to improve its global competitiveness through grassroots-level structural reforms and deregulation to reinforce its medium-term growth potential, the survey said. 

MEDIUM-TERM ROADMAP

The survey said that if India wants to become a developed economy by 2047, as envisioned by Prime Minister Narendra Modi, it will have to grow at around 8% on average for around "a decade or two". "While the desirability of this growth rate is unquestionable, it's important to recognise that the global environment – political and economic – will influence India's growth outcomes," the survey said. 

At a press conference after the release of the Economic Survey, Chief Economic Advisor V. Anantha Nageswaran said that in the process of becoming a developed economy by 2047, there will be years when growth is higher than the required level and in some years growth will be lower than that. The pace of the growth of the Indian economy will be influenced by the global economy and the growth of India's exports, Nageswaran said. 

"India is in the middle of a change that represents an unprecedented economic challenge and opportunity," the survey said. It suggested policy responses with special emphasis on the importance of domestic growth levers and the shedding of regulatory compliance burden. "Enhancing economic freedom for individuals and small businesses is arguably the most important policy priority to define and bolster India's medium-term growth prospects," the survey said.  End

Reported by Shubham Rana

Edited by Tanima Banerjee

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