Union Finance Minister Nirmala Sitharaman tabled the Economic Survey 2024-2025 on 31-01-2025, following President Droupadi Murmu’s address to both houses of Parliament, which marked the commencement of the FY 2025-26 Budget session.
The Economic Survey indicates that India’s GDP growth is expected to range between 6.3% and 6.8% in 2025-26, supported by robust private consumption and investment. However, the Survey also warns of significant global economic and political uncertainties that could impact growth. While domestic investment and output growth show promise, navigating global headwinds will require strategic and prudent policy management, according to Chief Economic Adviser Dr. V. Anantha Nageswaran. It highlights steady economic growth, resilience in key sectors, and the necessity of structural reforms to sustain long-term development. Despite global economic uncertainties, India remains one of the fastest-growing major economies, with real GDP growth estimated at 6.4% in FY25, close to its decadal average.
This year’s Economic Survey is structured into 13 chapters, covering various aspects of the economy:
-
State of the economy: Getting back into the fast lane
-
Monetary and financial sector developments: The cart and the horse
-
External sector: Getting FDI right
-
Prices and inflation: Understanding the dynamics
-
Medium-term outlook: Deregulation drives growth
-
Investment and infrastructure: Keeping it going
-
Industry: All about business reforms
-
Services: New challenges for the old war horse
-
Agriculture and food management: Sector of the future
-
Climate and environment: Adaptation matters
-
Social sector: Extending reach and driving empowerment
-
Employment and skill development: Existential priorities
-
Labour in the AI era: Crisis or catalyst
Macroeconomic Overview
India’s GDP is projected to grow between 6.3% and 6.8% in FY26, reflecting a stable economic environment. The real Gross Value Added (GVA) is also expected to expand by 6.4% in FY25. The report underscores that growth is driven by strong domestic demand, capital expenditure, and a thriving services sector.
-
Capital Expenditure: Grew at 8.2% between July and November 2024 and is expected to accelerate further.
-
Retail Inflation: Softened to 4.9% in April-December 2024, with the consumer price index aligning towards the target of 4% in FY26.
-
Exports: Overall exports registered 6.0% year-on-year growth during April-December 2024.
-
Foreign Direct Investment (FDI): Gross inflows rose from USD 47.2 billion in FY24 to USD 55.6 billion in FY25, reflecting a 17.9% YoY increase.
-
Foreign Exchange Reserves: Stood at USD 640.3 billion at the end of December 2024, covering 10.9 months of imports and nearly 90% of external debt.
Sectoral Analysis
Agriculture and Allied Sectors
The agriculture sector is projected to grow at 3.8% in FY25, supported by a record Kharif food grain production of 1,647.05 LMT, marking an increase of 89.37 LMT over the previous year. Key drivers include horticulture, livestock, and fisheries. A 15.8% YoY increase in solar and wind power capacity addition also augments the rural economy.
Industrial Sector
The industrial sector is estimated to grow at 6.2% in FY25, supported by robust performance in construction, electricity, gas, and water supply sectors. However, growth moderated in Q2 of FY 2024-25 due to:
-
Weak global demand affecting manufacturing exports.
-
Monsoon variations impacting mining and construction.
-
Festive season timing differences compared to previous years.
Despite these challenges, India’s Manufacturing Purchasing Managers Index (PMI) remains in the expansionary zone, driven by strong domestic demand and new business gains.
Services Sector
The services sector remains a pillar of economic growth, with estimated growth of 7.2% in FY25. Notably, services exports surged to 12.8% during April-November FY25, nearly doubling the 5.7% growth in FY24. The sector benefits from thriving financial services, real estate, professional services, public administration, and defence.
Investment and Infrastructure Growth
The Survey underscores the need for continuous infrastructure investment over the next two decades to sustain long-term high growth. The government launched a ₹50,000 crore Self-Reliant India Fund to provide equity support to MSMEs.
The BSE stock market capitalization to GDP ratio stood at 136% at the end of December 2024, significantly outpacing China (65%) and Brazil (37%), reflecting robust investor confidence in India’s economic prospects.
Inflation and Price Trends
Inflation remains a crucial concern, but the Survey highlights positive trends in managing price stability. Retail headline inflation eased to 4.9% in the first three quarters of FY25, down from 5.4% in FY24. The Consumer Food Price Index (CFPI) saw a slight uptick, driven by higher prices of certain food items like vegetables and pulses. However, India’s consumer price inflation is expected to align with the target of around 4% by FY26, as per the Reserve Bank of India (RBI) and the International Monetary Fund (IMF).
Banking Sector Performance
The banking sector has demonstrated stability, with a significant reduction in non-performing assets (NPAs) to a 12-year low of 2.6% of gross loans. ₹3.6 lakh crore realized through the resolution of 1,068 plans under the Insolvency and Bankruptcy Code till September 2024. Capital buffers for scheduled commercial banks remain strong, with the capital-to-risk-weighted assets ratio (CRAR) standing at 16.7% as of September 2024, well above the regulatory norm.
Employment and Social Indicators
-
Unemployment Rate: Declined to 3.2% in 2023-24 from 6.0% in 2017-18.
-
Social Services Expenditure: Registered an annual growth rate of 15% from FY21 to FY25.
-
Government Health Expenditure: Increased from 29% to 48% between FY15 and FY22, reducing out-of-pocket healthcare expenses from 62.6% to 39.4%.
AI and Workforce Transformation
The Economic Survey acknowledges that Artificial Intelligence (AI) poses both challenges and opportunities. CEA Nageswaran highlighted the need for:
-
Institutional support to train the workforce
-
Changes in academic curricula to align with AI-driven industries
-
Reformed workplace practices to accommodate technological transitions
While AI augments labour and can deliver broad-based social benefits, the private sector must balance AI adoption with social costs, which could manifest over the long term.
Mental Health, Workplace Culture, and Productivity
For the first time, the Economic Survey explores mental health and its correlation with productivity. Chapter 11 identifies four key factors that impact mental well-being:
-
Social connectivity (family and friends)
-
Healthy eating habits
-
Physical activity
-
Reduced smartphone usage
The Survey finds that hostile work cultures, excessive working hours, and sedentary lifestyles negatively impact mental health, affecting overall economic productivity.
-
Lower mental health scores correlate with lower workplace productivity
-
Private sector initiatives in employee well-being can influence India’s demographic dividend realization
Inflation and Food Security
The Economic Survey proposes a policy shift to reduce cereal output and boost production of pulses and edible oils, emphasizing:
-
Market mechanisms for price risk hedging
-
Preventing excessive fertilizer use
-
Discouraging water and power-intensive crop production
Additionally, the Survey stresses the need for climate-resilient crop varieties to mitigate damage from extreme weather conditions and ensure food security.
India’s Growing Data Centre Market
India’s data centre market is projected to grow to $11.6 billion by 2032. The current colocation data centre capacity is 977 MW, with 1.03 GW under construction (2024-2028) and 1.29 GW planned.
Climate and Environmental Concerns:
The Survey draws attention to India’s continued efforts towards a greener economy. It reports a 15.8% year-on-year increase in capacity addition in solar and wind power, a key focus for achieving renewable energy targets. As India progresses toward its climate goals, the integration of sustainable practices into the growth trajectory remains critical.
India is also addressing climate change through policy measures and global partnerships, aligning with international environmental agreements. However, the Survey stresses that ongoing investment in clean energy and climate adaptation will be essential to mitigate the adverse impacts of climate change, especially for vulnerable sectors like agriculture.
Challenges from China’s Manufacturing Dominance
The CEA highlighted challenges posed by China’s emergence as a manufacturing superpower, particularly for industries dependent on Chinese supply chains. Solar equipment manufacturers and other industries remain vulnerable to supply chain disruptions, price fluctuations, and currency risks.
Policy Recommendations and Future Outlook
CEA Nageswaran emphasized that raising India’s growth average in the next two decades will require leveraging its demographic dividend through deregulation. He cautioned that a “business as usual” approach could lead to economic stagnation and stressed the importance of policy stimulus for sustained growth.
The focus is on Ease of Doing Business 2.0, aimed at fostering a robust SME sector (Mittelstand model) and enhancing India’s economic freedom.
Additionally, collaboration between government, private sector, and academia is emphasized to mitigate the societal impacts of AI, ensuring a balanced approach to technological advancements.
Conclusion
The Economic Survey 2024-25 presents a cautiously optimistic outlook for India’s economy. It highlights the importance of deregulation, sustained infrastructure investment, and policy continuity to maintain high growth. With strong fundamentals, robust investment inflows, and strategic policy interventions, India is well-positioned to achieve its Viksit Bharat 2047 vision while navigating global economic uncertainties.
As the world’s fastest-growing major economy, India’s economic trajectory remains resilient, offering confidence to investors, policymakers, and stakeholders in the country’s long-term growth story.
