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Economy

India’s Economy Set for 6.3%-6.8% Growth in FY26, Says Economic Survey 2024-25

The survey says that for India to achieve its goal of Viksit Bharat by 2047, the economy must sustain an average growth rate of around 8% at constant prices for a decade or more.

India’s Economy Set for 6.3%-6.8% Growth in FY26, Says Economic Survey 2024-25

Nirmala Sitharaman in Lok Sabha on Friday Screengrab from a Sansad TV video.

The Economic Survey for 2024-25 was tabled in Parliament on January 31, ahead of the Union Budget presentation scheduled for tomorrow.

The report highlights both opportunities and challenges in domestic investment, output growth, and disinflation for FY26. Despite these factors, it asserts that India’s economic fundamentals remain strong, backed by a stable external account, calibrated fiscal consolidation, and steady private consumption.

It projects a GDP growth rate of 6.3% to 6.8% for FY26.

Presented by Union Finance Minister Nirmala Sitharaman following President Droupadi Murmu’s address, this survey marks the second one within six months, following the July 2024 edition, which was released after the new National Democratic Alliance (NDA) government took office.

The survey says that for India to achieve its goal of Viksit Bharat by 2047—becoming a developed nation by the centenary of independence—the economy must sustain an average growth rate of around 8% at constant prices for a decade or more.

“Viksit Bharat@2047 envisions India as a developed nation by 2047, the centenary of our independence. This would entail sustained economic growth of close to 8 per cent every year for at least a decade,” the survey states.

The Economic Survey, a 482-page document, has been prepared as per tradition by the Economic Division of the Department of Economic Affairs (DEA) under Chief Economic Advisor V. Anantha Nageswaran.

GDP, Inflation, and Employment

According to the survey, India's GDP, measured at constant (2011-12) prices, grew by 6.7% in Q1 FY25 and 5.4% in Q2 FY25, indicating an overall real GDP growth of 6% in the first half of the fiscal year. On the supply side, real Gross Value Added (GVA) is estimated to expand by 6.4%.

The agriculture sector is expected to rebound, with projected growth of 3.8% in FY25. Meanwhile, the industrial sector is anticipated to grow at 6.2%, driven by strong performance in construction activities and utilities, including electricity, gas, and water supply.

“Strong growth rates in construction activities and electricity, gas, water supply and other utility services are expected to support industrial expansion,” the survey says.

The services sector is forecasted to maintain robust growth of 7.2%, propelled by activity in financial services, real estate, professional services, public administration, defence, and allied sectors.

On the inflation front, the survey suggests that price pressures are easing. Retail headline inflation, as measured by the Consumer Price Index (CPI), has declined from 5.4% in FY24 to 4.9% during April-December 2024.

The decrease is primarily attributed to a 0.9 percentage point drop in core inflation (excluding food and fuel) during this period.

However, the survey acknowledges that while the average inflation trend is downward, fluctuations in food prices and select commodities have occasionally pushed CPI inflation toward the upper range of the Reserve Bank of India's (RBI) tolerance band of 4% ± 2%.

Notably, the survey does not provide details on the rollout of the employment and skilling initiative announced in the Union Budget 2024-25. The scheme, with an outlay of Rs 2 lakh crore, aims to benefit 4.1 crore youth over five years.

Foreign Portfolio Investment (FPI) and Trade

The survey highlights volatility in foreign portfolio investment (FPI) flows in the latter half of 2024, attributing this to global geopolitical shifts and monetary policy changes.

“Net FPI inflows slowed to USD 10.6 billion in April-December 2024 from USD 31.7 billion during the same period the previous year,” the survey states.

The inclusion of India’s sovereign government securities (G-secs) of specific tenors in the JP Morgan EM Bond Index has led to heightened FPI activity in the debt segment.

India’s foreign exchange reserves showed significant fluctuations, rising from USD 616.7 billion in January 2024 to USD 704.9 billion in September 2024 before moderating to USD 634.6 billion by January 3, 2025.

According to the survey, these reserves are sufficient to cover 90% of the country’s external debt.

Structural Reforms

The survey strongly advocates for deregulation, emphasizing the need for simplification of policies while recognizing areas requiring regulatory oversight.

It asserts that “every chapter of the Economic Survey makes a case for simplification and deregulation wherever possible and necessary,” while also identifying areas where regulatory interventions may be essential.

For long-term economic resilience and global competitiveness, the survey recommends the need for “deregulation and reforms at the grassroots level” as crucial strategies to strengthen India's medium-term growth trajectory.

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