Economic Survey 2024-25

Economic Survey 2024-25

The Finance Minister, Nirmala Sitharaman, presented the Economic Survey 2024-25 in Parliament, laying the groundwork for the Union Budget 2025. This annual document evaluates India's economic health, highlights sectoral trends, identifies challenges, and provides forecasts for the future.

Overview of the Economic Survey
The Economic Survey, prepared by the Economic Division of the Ministry of Finance under the Chief Economic Adviser, assesses the nation’s economic progress. Originally introduced in 1950-51 as part of the budget, it was separated in 1964 and is now tabled a day before the Union Budget.

Key Highlights of the Economic Survey 2024-25

State of the Global and Indian Economy

• Global Trends: The IMF predicts a global GDP growth of 3.2% in 2024 and 3.3% in 2025. While the manufacturing sector faces hurdles due to supply chain disruptions, the services sector remains resilient. Inflation rates have declined worldwide, but services inflation remains persistent, leading to varied monetary policies.
• Geopolitical Challenges: Conflicts such as the Russia-Ukraine war and the Israel-Hamas crisis have strained global trade, energy security, and inflation. The Suez Canal disruptions have increased shipping costs and extended delivery times.
• India’s Economic Growth: India’s GDP is projected to grow between 6.3% and 6.8% in FY26, with real Gross Value Added (GVA) estimated at 6.4% in FY25.

Sectoral Performance

• Agriculture: The sector is expected to expand by 3.8% in FY25, fueled by record Kharif production and strong rural demand.
• Industry & Manufacturing: Growth in this sector is forecast at 6.2% in FY25, though manufacturing is facing global demand pressures.
• Services: The fastest-growing sector, with an expected growth rate of 7.2% in FY25, led by IT, finance, and hospitality.

External Sector and Trade

• Exports & Imports: India's total exports (goods and services) increased by 6% year-on-year in the first nine months of FY25, while merchandise exports grew by 1.6%. Imports, however, rose by 5.2%, widening the trade deficit.
• Remittances & Current Account Deficit: India remained the top global recipient of remittances, helping maintain the Current Account Deficit (CAD) at 1.2% of GDP.
• Foreign Exchange Reserves: Reserves stood at USD 640.3 billion (as of Dec 2024), covering 90% of external debt and ensuring financial stability.

Monetary & Financial Sector Developments

• Banking Sector: Gross Non-Performing Assets (GNPA) of Scheduled Commercial Banks reached a 12-year low of 2.6% in 2024.
• RBI Policies: The RBI maintained the repo rate at 6.5% while reducing the Cash Reserve Ratio (CRR) to 4%, injecting Rs 1.16 lakh crore into the economy.
• Capital Markets: Primary market fundraising reached Rs 11.1 lakh crore (Apr–Dec 2024), while IPO fundraising tripled to Rs 1.53 lakh crore.

Infrastructure & Investment

• Government Initiatives: The National Infrastructure Pipeline and the National Monetisation Pipeline continue to drive capital investment.
• Railways & Roads: 2031 km of railway network was commissioned, and 17 new Vande Bharat trains were introduced. National Highway construction reached 6,215 km.
• Energy & Connectivity: India's total installed power capacity hit 456.7 GW, with renewables contributing 47% (209.4 GW). BharatNet expanded fiber connectivity to 2.14 lakh Gram Panchayats, and 5G services now cover 779 districts.

Prices & Inflation

• Global Trends: Inflation, which peaked at 8.7% in 2022, declined to 5.7% in 2024 due to monetary tightening.
• Domestic Inflation: Retail inflation dropped from 5.4% in FY24 to 4.9% in FY25, though food inflation surged to 8.4% due to rising prices of vegetables and pulses.

Medium-Term Economic Outlook

• The IMF predicts India will become a USD 5 trillion economy by FY28 and USD 6.3 trillion by FY30.
• The economy must grow at 8% annually to meet the Viksit Bharat 2047 goal.

Agriculture & Food Security

• Agriculture’s Contribution: The sector accounts for 16% of GDP and employs 46.1% of the population.
• Food Production: Kharif foodgrain production reached 1,647 LMT in 2024.
• Welfare Initiatives: The PM Garib Kalyan Anna Yojana provides free food grains to 80 crore people.

Climate & Environmental Policies

• Renewable Energy: India’s non-fossil fuel capacity stands at 46.8%, targeting 50% by 2030.
• Carbon Sink Growth: Forest carbon sink has increased by 2.29 billion tonnes of CO₂ since 2005.
• Climate Finance: India issued USD 20,000 crore in Sovereign Green Bonds in FY24 to support sustainable projects.

Social Sector & Employment

• Education & Skill Development: Spending in the education sector has grown at 12% CAGR, with a significant rise in higher education enrolment.
• Healthcare: The sector saw an 18% rise in spending, with Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) covering major healthcare expenses.
• Employment Trends: The unemployment rate declined to 3.2% in 2023-24. Female labor force participation increased significantly, reaching 41.7%.
• Startups & Innovation: India ranks 6th globally in patent filings, with over 73,151 startups led by women directors.

Future Challenges & Opportunities

• AI & Labor Market: The rise of AI presents both job creation and displacement risks. India's AI sector is projected to grow at 25-35% CAGR by 2027.
• Economic Stability: While the rupee is expected to depreciate slightly at 0.5% annually, India's macroeconomic fundamentals remain strong.

India’s Economic Challenges and the Path Forward (Economic Survey 2024-25)
Global Challenges
Geopolitical Risks: Ongoing conflicts, such as the Russia-Ukraine war and disruptions in the Red Sea, are straining global trade, impacting energy prices, and destabilizing supply chains.

Trade Slowdown: Rising protectionism and shifts in global supply chains are affecting India’s export competitiveness, making diversification essential.
Financial Market Volatility: Fluctuating interest rates in the US and EU could lead to capital outflows, putting pressure on India’s foreign exchange reserves and currency stability.

Inflation Concerns
Food Inflation: Despite stable core inflation, food prices continue to rise due to supply constraints.
Climate-Driven Disruptions: Erratic monsoons, droughts, and extreme weather events are adversely impacting agricultural output, food security, and rural incomes.

Investment & Infrastructure Bottlenecks
Private Investment Hesitancy: While public capital expenditure (CapEx) has grown at a CAGR of 38.8% (FY20-FY24), private sector investments remain subdued due to global uncertainties and regulatory hurdles.
High Logistics Costs: Despite efforts under the National Logistics Policy, logistics costs remain elevated at 13-14% of GDP, impacting industrial competitiveness.
Urbanization Challenges: Poorly planned urban growth has led to traffic congestion, inadequate public transport, and soaring housing costs. Delays in Smart City and urban transport projects due to regulatory and financial constraints further exacerbate the problem.

Employment & Skills Deficit
Jobless Growth: Economic expansion has outpaced job creation, largely due to the dominance of high-skill, low-employment sectors and premature deindustrialization.
Low Labor Force Participation Rate (LFPR): India’s female LFPR stands at 41.7% (FY25), significantly lower than the global average of over 50%.

Fiscal & Financial Sector Risks
State-Level Debt Concerns: Several states face fiscal distress due to rising subsidies, weak revenue growth, and heavy reliance on central government transfers.
Unsecured Lending Risks: The rapid expansion of unsecured lending poses stability concerns for NBFCs and fintech lenders, necessitating stricter regulatory oversight and cybersecurity measures.
Limited Credit Access for MSMEs: Despite advancements in digital lending, credit penetration remains inadequate, hampering small business growth.

External Sector Challenges
Foreign Investment Trends: While Foreign Direct Investment (FDI) has grown by 17.9% YoY, higher repatriation and disinvestment rates remain a concern.
Export Dependence on IT & Services: Nearly 70% of India’s services exports stem from IT and business services, making the economy vulnerable to global demand fluctuations.

Climate Change & Energy Transition
Energy Transition Barriers: Grid stability concerns, high energy storage costs, and slow adoption of renewables are slowing India’s transition to clean energy.
Dependence on Coal: India remains heavily reliant on coal, delaying its shift toward sustainable energy sources.
Climate-Related Risks: Extreme weather events and inadequate global climate financing pose significant challenges to sustainable growth.

Ease of Doing Business & Innovation Challenges
Regulatory Barriers: Complex labor laws, cumbersome land acquisition processes, and tax-related challenges continue to hinder MSMEs and startups.
Low R&D Investment: With research and development spending at just 0.64% of GDP, India lags in innovation and technological competitiveness.

Impact of AI on Employment & Energy
Workforce Disruptions: AI adoption is expected to disrupt India’s IT, BPO, and banking sectors, particularly affecting lower-value service jobs.
Energy Demand: AI data centers could consume as much electricity as India’s total current energy consumption (1,580 terawatt-hours), posing sustainability concerns.

The Way Forward
Managing Global Uncertainties

• Diversify trade partners and strengthen regional agreements such as the Indo-Pacific Economic Framework and the India-Middle East-Europe Corridor.
• Enhance energy security by increasing investments in strategic petroleum reserves and renewable energy alternatives.
• Boost domestic manufacturing through Production-Linked Incentive (PLI) schemes and allow 100% FDI in key sectors.

Controlling Inflation

• Strengthen food supply chains with improved storage, logistics, and real-time price monitoring.
• Encourage private sector investment through tax incentives, streamlined land and labor reforms, and reduced compliance burdens.

Ensuring Fiscal Stability

• Expand the Goods and Services Tax (GST) coverage and digitize tax administration to enhance state revenue efficiency.
• Rationalize subsidies to balance fiscal discipline with social welfare.
• Encourage states to implement fiscal responsibility frameworks to curb unsustainable borrowing.

Addressing Unemployment & Skill Gaps

• Reduce regulatory barriers for MSMEs to foster job creation and innovation.
• Integrate AI and digital skills into vocational training programs to prepare the workforce for future job markets.

Accelerating Energy Transition

• Scale up investments in green hydrogen, solar, and wind energy projects.
• Develop energy storage solutions to enhance grid stability and support renewable energy expansion.
• Strengthen climate resilience by promoting crop insurance, water conservation, and sustainable agriculture.

Key Takeaways
While India’s economic fundamentals remain robust, the country faces significant challenges from geopolitical uncertainties, inflationary pressures, investment slowdowns, job creation hurdles, and climate change. Addressing these issues requires targeted policy reforms, fiscal prudence, and structural interventions to sustain high growth and enhance global competitiveness.

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