The Union Finance Ministry on 30 January released the Economic Survey for the financial year 2024-25, ahead of presenting the budget for the next financial year. The Economic Survey 2024-25 provides a detailed assessment of India’s economic performance over the past year and outlines future growth prospects.
Despite global uncertainties triggered geopolitical tensions and supply chain disruptions, the Indian economy has remained on a steady trajectory, with an estimated GDP growth rate of 6.4% for FY2025. The survey highlights the resilience of domestic demand, the stability of financial markets, and the role of regulatory reforms in driving economic progress. The report places a significant focus on deregulation and structural reforms as key drivers of sustainable growth.
Macroeconomic Overview and Growth Trends
India’s economic trajectory in FY2024-25 has been characterized by resilience and steady expansion, despite challenges in the global environment. The survey underscores the importance of private consumption and investment as primary drivers of growth. With inflation largely under control and fiscal consolidation measures in place, the economy has maintained a stable macroeconomic outlook, says the survey report.
The industrial sector grew by 6 per cent in the first half of FY25, while the services sector grew by 7.1 per cent in that period. The labour market has also improved, with the unemployment rate declining to 3.2%, reflecting a positive trend in job creation. Moreover, India’s external trade has witnessed a moderate upswing, with exports reaching USD 602.6 billion and imports rising to USD 682.2 billion.
The report states that private final consumption expenditure at constant prices is estimated to grow by 7.3 per cent, driven by a rebound in rural demand. The industrial sector is estimated to grow by 6.2 per cent in FY25, while agriculture sector is expected to rebound to a growth of 3.8 per cent. Growth in the services sector is expected to remain robust at 7.2 per cent.
The survey also points to global economic headwinds, including geopolitical tensions, supply chain disruptions, and the tightening of monetary policies by advanced economies. However, India’s strong domestic fundamentals, including robust consumption demand and increasing infrastructure investments, have cushioned the economy from these external pressures. The survey predicts a continued growth momentum, projecting a stable outlook for FY26 and beyond.
Monetary and Financial Sector Developments
The financial sector remains a pillar of economic stability, supported by strong banking performance and regulatory reforms. India’s banking sector has witnessed a notable improvement, with non-performing assets (NPAs) declining, and credit flows increasing across industries. Insolvency and Bankruptcy Code, 2016 played a crucial role in addressing the NPAs, and has redefined the debtor-creditor relationship.
The survey says that the deterrent effect of the Code has led to a significant shift in debtor behaviour, and thousands of debtors are resolving distress in the early stages of distress.
The Reserve Bank of India’s monetary policy stance has focused on controlling inflation while ensuring liquidity in the financial system.
Foreign direct investment (FDI) inflows showed signs of revival in FY2024-25, although net inflows remained subdued due to capital repatriation and tighter global liquidity conditions. Meanwhile, foreign portfolio investments (FPI) remained volatile, reflecting global market trends.
The survey also notes the growth in insurance industry and expansion of India’s pension system, which has become more inclusive, though there is scope for further improvement in retirement savings and financial security.
External Sector Performance: Trade and Investment
India’s external sector has shown resilience despite global challenges. The balance of payments remains stable, with foreign exchange reserves standing at USD 640.3 billion as of December 2024. India’s forex reserves are sufficient to cover 90 per cent of external debt and provide an import cover of more than ten months.
The survey highlights the government’s efforts to enhance ease of doing business for exporters, including streamlined trade facilitation measures and expanded market access.
India’s export growth was driven by services and high-value manufacturing, though challenges remain in the textile and agriculture sectors, which have been impacted by fluctuating global demand.
The survey also discusses the increasing role of bilateral and multilateral trade agreements, which are expected to diversify export markets and reduce dependency on traditional trade partners. Additionally, geopolitical risks and trade restrictions in developed markets pose potential challenges that policymakers must address in the coming years.
The report states that India must continue reducing trade costs and improving facilitation to boost export competitiveness.
Inflation and Price Stability
Inflation remained largely under control, although fluctuations in food and fuel prices necessitated policy interventions. The Consumer Price Index (CPI) inflation hovered around 5%, with food inflation being a primary driver. The CPI dropped by 0.9 percentage points between FY24 and FY25 (April-December), largely driven by decline in core services inflation.
India’s food inflation rate has remained firm, primarily driven by a few food items such as vegetables and pulses. The average food inflation rate in FY25 (April-December) was 6.5 per cent, excluding three most price-sensitive vegetables – Tomato, Onion and Potato.
The government implemented targeted subsidies and price controls to maintain affordability, particularly for essential commodities. The survey acknowledges the impact of extreme weather conditions on food supply chains, which contributed to price volatility. Efforts to modernize agricultural supply chains and enhance storage infrastructure are highlighted as key policy priorities to mitigate future inflationary risks.
Medium-Term Outlook: Deregulation and Structural Reforms
The survey notes that to realise its economic aspirations of becoming Viksit Bharat by the time of the centenary of independence, India needs to achieve a growth rate of around 8 per cent at constant prices, on average, for about a decade or two. It acknowledges that this will be impacted by global environment, both political and economic.
One of the central themes of the survey is the role of deregulation in driving economic growth. The government has taken major steps to simplify regulations, improve business conditions, and encourage private sector participation in economic activities. It adds that deregulation is more critical for MSME growth than large enterprises.
The survey projects that if India continues on this path, the economy could achieve an 8% annual GDP growth rate, helping the country become a USD 6.3 trillion economy by FY30.
The survey adds that India has made significant strides in promoting renewable energy and boosting domestic manufacturing of renewable energy equipment through initiatives such as the Production-Linked Incentive (PLI) Scheme.
Importantly, the report notes that promise of shared benefits from a globalised world with open trade, free flow of capital and technology, and sanctity for rules of the game are things of the past. It acknowledges the new reality, to look inwards, adding that the current tendencies in the rest of the world necessitate that India redoubles its efforts to boost exports and attract investment.
Investment and Infrastructure Development
Infrastructure investment remains a cornerstone of India’s economic strategy. The survey mentions that capital expenditure by the union government on major infrastructure sectors has increased at a trend rate of 38.8 per cent from FY20 to FY24. The National Infrastructure Pipeline now has over 9,766 projects and schemes across 37 sub-sectors. These projects are tracked and reviewed through the integrated India Investment Grid.
The power sector saw significant expansion, with total installed capacity reaching 456.7 GW, and renewable energy contributing 209.4 GW. The survey highlights key developments in transportation and logistics, particularly the expansion of Indian Railways, road networks, and metro systems. Investment in smart cities and urban infrastructure has also increased, with a focus on affordable housing, public transport, and digital connectivity.
The government has also prioritized rural infrastructure, with notable investments in irrigation, electrification, and road connectivity. These initiatives aim to bridge the urban-rural divide and promote balanced regional development.
The survey mentions key infrastructure projects of the government, like Dedicated Freight Corridors, Vande Bharat trains, Amrit Bharat Station Scheme, Bharatmala Pariyojana to develop 34,800 km of National Highways, National High-Speed Corridors, UDAN scheme for air travel, ports and river cruise tourism etc.
Industrial and Manufacturing Sector Reforms
India’s manufacturing sector has shown signs of recovery, although some segments continue to struggle. The industrial sector grew by 6.2 per cent in FY-25 as per first advance estimate of GDP, driven by robust growth in electricity and construction.
The government’s Production-Linked Incentive (PLI) scheme has boosted domestic manufacturing, particularly in electronics, pharmaceuticals, and automotive industries. The domestic production of electronic goods has increased substantially from ₹1.90 lakh crore in FY15 to ₹9.52 lakh crore in FY24,
The economic survey notes that the country has drastically reduced its dependence on smartphone imports, with 99 per cent now manufactured domestically. PLI scheme has now been introduced in 14 key sectors, not just electronics. The survey highlights the role of MSMEs (Micro, Small, and Medium Enterprises) in driving employment and economic diversification.
The report highlights reform done in patent and trademark procedures, stating that simplified processes have resulted in increased number of patent filings and trademark registrations.
The report also points out the challenges of supply chain dependencies on China and underscores the need for domestic capacity building in critical industries. Encouraging self-reliance in key sectors is emphasized as a strategic priority.
Services Sector: A Major Growth Engine
The services sector remains a dominant contributor to India’s GDP, driven by IT services, digital platforms, and financial services. Its contribution to the total gross value added (GVA) at current prices has increased from 50.6 per cent in FY14 to about 55 per cent in FY25.
The survey notes that India’s IT exports have continued to expand, despite global economic uncertainties. Business services, including start-ups and fintech, are also growing rapidly, supported by government initiatives and venture capital investments.
Another area of focus is logistics and transport-related services, which are benefiting from improved infrastructure and digitalization. The expansion of e-commerce and digital payment platforms has further strengthened the service economy.
The economic survey notes that the new risks have surfaced in the growth of IT and professional services in view of the recent changes in global policies following key electoral outcomes. It states that that growth in manufacturing has a significant bearing on service sector growth, and vice versa., due to ‘servicification’ of manufacturing, i.e., increasing utilization of services in manufacturing production and post-production value addition.
The survey says that one of the primary conditions for manufacturing and service sector progress is the focus on appropriate skilling of the labour force. It further adds that there is an urgent need to review and amend complicated procedures at the grassroot level, regulations and rules that hinder both manufacturing and services.
Agriculture and Food Management
The agricultural sector continues to play a vital role in India’s economy, with significant improvements in crop production, irrigation coverage, and farmer support initiatives. The Kisan Rin Portal, launched to facilitate agricultural credit, has improved financial access for small and marginal farmers. Additionally, food security programs such as the Public Distribution System (PDS) have been instrumental in reducing hunger and malnutrition.
The survey emphasizes the need for climate-resilient farming practices, as changing weather patterns continue to impact agricultural output. Expanding crop diversification, sustainable irrigation, and advanced technology adoption are highlighted as necessary steps for ensuring long-term food security.
Employment and Skill Development
Employment trends have shown a positive trajectory, with the formal job market expanding significantly. The Employees’ Provident Fund Organisation (EPFO) registered over 131 lakh new subscribers in FY24, almost double the figure from FY19. The survey highlights the government’s focus on skilling initiatives, including vocational training and digital literacy programs.
As automation and artificial intelligence reshape the job market, the survey stresses the importance of reskilling and upskilling programs to prepare India’s workforce for future job opportunities. The government’s initiatives in STEM education, startup incubation, and research funding are expected to enhance India’s competitive edge in the global market.
The survey says that farmers need to be nudged away from impairing their soil fertility with an unbalanced application of fertilisers and from producing already overproduced crops, which deplete India’s water resources and use up electricity excessively. It adds that farmers must be allowed to receive price signals from the market unimpeded, and they need to have market mechanisms to hedge their price risks.
Conclusion and Policy Recommendations
The Economic Survey 2024-25 provides a comprehensive roadmap for India’s economic future, emphasizing deregulation, infrastructure investment, financial stability, and innovation-driven growth. The government’s focus on simplifying regulations, expanding digital and physical infrastructure, and strengthening key industries is expected to create a more resilient and competitive economy.
With strong macroeconomic fundamentals, strategic policy interventions, and a youthful workforce, India is well-positioned to sustain its growth momentum and achieve its long-term vision of becoming a USD 6.3 trillion economy by FY30. However, addressing global trade uncertainties, inflationary pressures, and climate-related challenges will be crucial for sustaining long-term economic stability. The survey calls for continued policy reforms and a proactive approach to economic governance, ensuring that India remains a key player in the evolving global economic landscape.
