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The Economic Survey indicates a steady outlook for inflation and consumption, with rural demand poised for improvement.
Economic Survey 2025 Highlights
Economic Survey 2024-25 Highlights: Union Finance Minister Nirmala Sitharaman tabled the Economic Survey 2024-25 in Parliament on Friday. The Survey predicts that India’s GDP growth for FY26 is expected to range between 6.3% and 6.8%, amid global uncertainties. The Economic Survey indicates a steady outlook for inflation and consumption, with rural demand poised for improvement. This report was presented just six months after the previous one, following the general elections held in July 2024.
The Economic Survey is an essential document that outlines India’s economic performance, government policies, and projections for the upcoming fiscal year. It is prepared by the Economic Division of the Department of Economic Affairs, led by the Chief Economic Advisor (CEA).
Here are the Key Highlights from the Economic Survey 2024-25:
1. Global Economic Overview
The global economy demonstrated steady but uneven growth in 2024, hindered by a slowdown in manufacturing. Geopolitical risks, conflicts, and uncertainties surrounding trade policies contributed to global economic instability.
2. India’s Economic Performance
India’s real GDP growth for FY25 is projected at 6.3%-6.8%, primarily driven by strong performances in agriculture and services. Rural demand has improved significantly, supported by a record Kharif crop production.
However, manufacturing sectors faced challenges due to weaker global demand. Macroeconomic stability was maintained through disciplined fiscal management and a strong external balance. Money supply (M3) growth moderated to 9.3% year-on-year as of December 2024, and a higher money multiplier indicates increased liquidity in the economy.
3. Outlook for FY26
The survey presents a balanced outlook for FY26, with challenges posed by global uncertainties and potential commodity price shocks. Domestically, increased investment, improved consumer confidence, and corporate wage growth are expected to be key drivers of growth.
Positive trends in rural demand and stable macroeconomic conditions present a favorable upside. Structural reforms and deregulation are highlighted as essential to boosting India’s global competitiveness.
4. India’s Growth Drivers and the Need for Deregulation
The Survey emphasizes the need for simplifying regulatory compliance to foster greater economic freedom for individuals and businesses, especially for small enterprises.
India should focus on leveraging domestic growth drivers, given the changing global economic landscape.
5. China’s Dominance in Manufacturing and Energy Transition
The Survey acknowledges China’s dominance in manufacturing, with its manufacturing output projected to surpass the combined share of the next 10 countries. China’s lead in the global energy transition, particularly in renewable energy, is also noted.
“Acknowledging the elephant [and the dragon] in the room that will have a bearing on the growth projections – fundamental shifts in the global economic order combined with China’s manufacturing prowess and strategic dominance,” the Survey said.
6. Performance of the Banking Sector
India’s banking sector has shown significant improvement in asset quality, with declining Gross Non-Performing Assets (GNPAs) and rising Capital Adequacy Ratio (CRAR).
The GNPA ratio of Scheduled Commercial Banks (SCBs) fell to a 12-year low of 2.6% as of September 2024.
7. Global Inflation Trends
Global food inflation is declining due to improving supply conditions, but some emerging economies, including India, continue to experience higher inflation.
8. Domestic Inflation in India
India’s headline inflation moderated in FY24 due to a significant reduction in core inflation and fuel price inflation.
Food inflation was primarily driven by specific food items like vegetables and pulses.
Extreme weather conditions, particularly in the case of vegetables and pulses, contributed to supply disruptions and price increases.
Uneven monsoon patterns caused price pressures, especially on tomatoes and onions, exacerbating inflationary trends.
9. Performance of the Service Sector
India’s services sector continues to expand, with emerging markets driving global growth.
India’s share in global services exports is steadily increasing, with significant contributions from public administration and IT services.
The Purchasing Managers’ Index (PMI) indicates ongoing expansion in the services sector.
10. Employment Trends
Significant improvements were observed in labor market indicators, including a decline in the unemployment rate and increased labor force participation.
There was a noticeable rise in self-employment, while regular salaried and casual work declined, indicating a shift towards flexible work arrangements.
Women’s participation in regular wage employment decreased, while self-employment and contributions to household enterprises saw a rise.
Agriculture remains the dominant employment sector, followed by services and industry.
11. Agriculture Sector
India’s agriculture sector showed a growth rate of 3.5% in Q2 of FY25, marking a recovery from previous quarters.
12. Education and Health
The Survey highlights the importance of integrating innovative solutions to improve education, such as new teaching methods, peer learning, and life skills training.
There is a focus on preventive healthcare, mental health, and leveraging technology to reduce healthcare costs.
The Ayushman Bharat scheme is expanding health coverage to vulnerable populations, including senior citizens.
The U-WIN portal is being used to digitize vaccination records and improve immunization efforts.
Awareness campaigns are being launched around the negative health impacts of Ultra-Processed Foods (UPFs).
13. Climate Change and Adaptation Measures
India’s vulnerability to climate change necessitates urgent adaptation measures. Adaptation in coastal regions includes initiatives such as mangrove conservation, sea wall construction, and dune planting. The Mangrove Initiative for Shoreline Habitats & Tangible Incomes (MISHTI) promotes mangrove restoration.
14. Financial Sector Risks
Despite resilience, the Indian financial sector faces potential risks, including high valuations in US stock markets, increased retail participation in Indian markets, and the rising influence of financial markets on policy decisions.
15. GIFT City Developments
The GIFT City is playing a crucial role in India’s financial sector by attracting global financial institutions and fostering a vibrant fintech ecosystem.
16. Insurance Sector Developments
India’s insurance sector is growing, driven by increased premium income and penetration, although challenges remain in terms of closing the coverage gap.
17. Pension Sector Developments
The pension sector has shown significant growth, particularly through the National Pension System (NPS) and Atal Pension Yojana (APY), but there is potential for further expansion, especially for informal sector workers.
18. Labor in the AI Era: Crisis or Catalyst?
The Survey addresses the potential impact of AI on employment, forecasting significant job displacement. However, it suggests that AI could also be a catalyst for new opportunities, especially in sectors driven by services.
19. Job Creation for the Future
To accommodate India’s growing workforce, the country needs to create 78.5 lakh new non-farm jobs annually until 2030-32.
Achieving 100% literacy, developing quality educational institutions, and building high-quality infrastructure are key to creating future-ready workers.
