Finance Minister Nirmala Sitharaman tables Economic Survey 2024-25; FY26 growth pegged at 6.3-6.8%
M.U.H
31/01/202523
Union Finance Minister Nirmala Sitharaman tabled the Economic Survey for 2024-25 in both Houses of the Parliament on Friday, with the survey projecting the GDP growth for FY 2025-26 between 6.3% and 6.8%.
The Survey said navigating global headwinds will require strategic and prudent policy management and reinforcing the domestic fundamentals.
The economic growth rate is estimated to slip to a four-year low of 6.4% in the current financial year.
The Budget 2024-25 laid out a multi-sectoral policy agenda for sustained growth push. It further said that investment activity expected to pick up, supported by higher public capex and improving business expectations.
In regard to inflation, it said risk from higher commodity prices seems limited in FY26. However, geopolitical tensions still an issue, it added.
Food inflation is likely to soften in Q4 FY25 with seasonal easing of vegetable prices and kharif harvest arrivals.
The survey, an annual report prepared by the Ministry of Finance under the Chief Economic Advisor's guidance, offers a report card of India's economy for the current year.
While the finance ministry and its officials maintain that the Economic Survey is prepared independently and does not influence the Budget, it offers insights into potential developments to come ahead of the Union Budget 2025-26 which will be presented on Saturday.
HIGHLIGHTS FROM ECONOMIC SURVEY 2024-25
Indian economy to grow at 6.3-6.8% in FY26, against 6.4% in FY25
Navigating global headwinds will require strategic, prudent policy management and reinforcing the domestic fundamentals
Risks to inflation remain on account of significant global political, economic uncertainties
Rupee depreciation in 2024 mainly due to strong US dollar amid geopolitical tensions, uncertainty around US election.
Food inflation likely to soften in Q4 FY25 with seasonal easing of vegetable prices, Kharif harvest arrivals.
Investment activity expected to pick up, supported by higher public capex and improving business expectations
India needs to improve its global competitiveness through grassroots-level structural reforms
Forex at USD 640.3 billion, sufficient to cover 10.9 months of imports and 90% of external debt
Service oriented Indian economy vulnerable to automation, impact of AI is magnified for India given its size and low per capita income
Corporate sector has to display a high degree of social responsibility
Over 60-hour work week could have adverse health effects
Reserach to increase pulses, oilseeds, tomato, onion production needed to develop climate-resilient crop varieties, enhancing yield and reducing crop damage
India needs to grow by 8% on average for about two decades to become a developed nation by 2047
Investments need to grow at 35%, up from 31%, to achieve required growth
Focus of reforms, economic policy must now be on systematic deregulation
Tax breaks on electric vehicles and subsidies on renewable energy can motivate people to switch to low-carbon lifestyles
Need to develop the manufacturing sector further and invest in emerging technologies such as AI, robotics, and biotechnology
Lack of appropriate governance framework for AI may lead to potential abuse or misuse of technology
Meaningful market correction in 2025 could have cascading effect on India, especially given higher participation of new retail investors
Ease of Doing Business should be a state government-led initiative focused on fixing the root causes behind the unease of doing business
India should redouble its efforts to boost exports and attract investment. One way to do this is to benchmark ourselves to the rest of the world rather than our past
India needs a continued step-up of infrastructure investment over the next two decades for high growth
Only few states like Gujarat, Uttarakhand and Himachal Pradesh are able to cash on their high dependence on industrial sector to generate reasonable levels of incomes for their people
Economic stability, infrastructure creation fuelling real estate demand
Global Economic Performance:
The global composite PMI remained in the expansion zone for the fourteenth consecutive month in December 2024, with the services sector performing strongly, though manufacturing PMI showed contraction.
Sectoral Highlights:
Construction surged 15% above pre-pandemic trends, driven by infrastructure and housing demand.
The utilities sector surpassed its pre-pandemic level by FY23 and has maintained momentum.
Manufacturing is recovering but remains slightly below its pre-pandemic trend.
Mining continues to operate below its pre-pandemic trend.
Sectoral Recovery:
Financial, real estate, and professional services exceeded pre-pandemic levels by FY23.
Public administration, defense, and other services crossed the pre-pandemic trend by Q1 FY25.
Trade, hotels, transport, and communication services are slowly recovering post-pandemic.
Economic Growth Projections:
Real GVA growth for FY25 is estimated at 6.4%, with private consumption set to grow by 7.3%, led by a rural demand rebound.
Gross fixed capital formation (GFCF) is expected to rise by 6.4%.
Agriculture, Industry & Services:
Agriculture growth is projected at 3.8% in FY25. Kharif food grain production is expected to hit a record 1647.05 lakh metric tonnes, a 5.7% increase from FY24, aided by a normal southwest monsoon.
The industrial sector is estimated to grow by 6.2%, supported by strong growth in construction and utility services. Manufacturing PMI continues to grow at a strong pace despite challenges.
Services sector growth is expected to remain robust at 7.2%, driven by financial, real estate, and public administration services. The services sector registered a 7.1% growth in H1 FY25.
Rural Economic Sentiment: Survey found that 78.5% of rural households reported increased consumption expenditure in 2024.
Government Spending & Investment:
Union government capex increased by 8.2% in July-November 2024, with further acceleration expected.
Private sector investment intentions surged to ₹2.45 lakh crore for FY25, with a 23.6% increase in capital goods company order books.
Trade & Exports:
Goods and non-factor services exports grew by 5.6% in H1 FY25.
Imports grew by only 0.7%, and in Q2 FY25, imports contracted by 2.9%, contributing positively to GDP growth.
Fiscal Developments:
Defence, railways, and road transport accounted for 75% of capital expenditure.
Gross tax revenue grew by 10.7% YoY from April-November 2024, but net revenue growth was constrained due to higher tax devolution to States.
Inflation & Remittances:
Retail inflation eased from 5.4% in FY24 to 4.9% in H1 FY25.
India remains the top recipient of global remittances, with a current account deficit contained at 1.2% of GDP in Q2 FY25.
FDI & Capital Flows:
Gross FDI inflows rose by 17.9% YoY in April-November 2024, indicating strong investor confidence.
Foreign exchange reserves increased to USD 704.9 billion by September 2024, covering 90% of external debt.
Banking Sector Strength: NPAs in the banking system fell to a 12-year low of 2.6%, with SCBs' capital adequacy ratio standing at 16.7%.
Employment Trends:
Unemployment for those aged 15 and above dropped from 6% in 2017-18 to 3.2% in FY24.
The formal sector saw net EPFO subscriptions more than double from FY19 to FY24, with significant youth participation.
Notably, the first Economic Survey came into existence in 1950-51 when it used to be a part of the budget documents.
In the 1960s, it was separated from the Union Budget and tabled a day before the presentation of the Budget.
Last year, the Economic Survey had forecasted a lower growth rate of 6.5-7%, below the 7.2% projected by the RBI.
The theme of the survey was economic resilience and had set the tone for the policies were proposed in the 2024 Union Budget.
