The Economic Survey 2024-25 provides an in-depth analysis of India’s economic trajectory, highlighting key macroeconomic indicators, financial sector developments, and policy recommendations for sustained growth. This report sets the stage for the upcoming Union Budget and serves as a crucial tool for understanding India’s economic performance and future outlook.
State of the Economy
India’s economy has demonstrated remarkable resilience in the face of global economic uncertainties. The GDP growth rate is expected to be around 6.4% for FY25, supported by robust domestic consumption, government capital expenditure, and strong corporate earnings. Despite external headwinds, including geopolitical tensions, global economic slowdown, and supply chain disruptions, India has maintained its position as one of the fastest-growing major economies.
The survey highlights a steady expansion in economic activities across key sectors, with manufacturing and services sectors driving growth. The agriculture sector, while facing some climate-related challenges, has benefited from policy interventions aimed at improving productivity and sustainability. Furthermore, India’s digital economy is playing a significant role in driving economic expansion, with increased adoption of digital payments, e-commerce, and fintech innovations.
Monetary and Financial Sector Developments
The Reserve Bank of India (RBI) has kept the policy repo rate unchanged at 6.5% for most of FY25, shifting its stance from ‘withdrawal of accommodation’ to ‘neutral’ in October 2024. A reduction in the Cash Reserve Ratio (CRR) from 4.5% to 4% in December 2024 infused ₹1.16 lakh crore liquidity into the banking system, supporting economic activity.
The financial sector has witnessed improved credit growth, rising investor participation in capital markets, and continued progress in financial inclusion. The Gross Non-Performing Assets (GNPA) ratio of Scheduled Commercial Banks (SCBs) has fallen to a 12-year low of 2.6%, reflecting improved asset quality. Additionally, fintech adoption has increased access to credit and financial services, particularly for Micro, Small, and Medium Enterprises (MSMEs). The Unified Payments Interface (UPI) transactions have reached new highs, reflecting India’s growing digital financial ecosystem.
The survey also emphasizes the need to strengthen the financial sector through policy measures that promote responsible lending, risk management, and sustainable banking practices. The regulatory framework for Non-Banking Financial Companies (NBFCs) has been further refined to enhance transparency and stability in the sector.
External Sector Performance
India’s external sector remained stable, with total exports (merchandise and services) reaching USD 602.6 billion, a 6% increase in the first nine months of FY25. The Nominal Effective Exchange Rate (NEER) remained stable, while the Real Effective Exchange Rate (REER) appreciated from 103.2 in April 2024 to 107.2 in December 2024. Foreign exchange reserves stood at USD 640.3 billion by December 2024, covering 90% of the country’s external debt, ensuring a strong buffer against external shocks.
Despite global trade challenges, India has strengthened its position in exports of pharmaceuticals, IT services, and electronics manufacturing. The government has actively pursued trade agreements with key global partners to improve market access for Indian products. The survey underscores the importance of diversifying export markets and reducing dependency on a few key trading partners.
Prices and Inflation Trends
Inflationary pressures have eased, with headline inflation declining from 5.4% in FY24 to 4.9% in April-December 2024. However, food inflation remains a concern, particularly due to supply constraints in vegetables and pulses. The government has taken proactive measures such as expanding buffer stocks, rationalizing import duties, and improving agricultural supply chains to curb price volatility.
The survey also discusses the role of global commodity prices in influencing domestic inflation trends. While crude oil prices have moderated, fluctuations in global supply chains continue to impact essential commodities. The government’s focus on self-sufficiency in food production and energy security will be critical in managing inflation in the coming years.
Investment and Infrastructure Growth
Infrastructure development remains a key driver of economic growth. The survey highlights significant progress in roads, railways, and power sector investments. The National Infrastructure Pipeline (NIP) has facilitated major capital expenditure projects, improving connectivity and logistics efficiency.
Urban infrastructure has also received a boost, with initiatives aimed at sustainable development, affordable housing, and smart city projects. The power sector is witnessing a transition towards renewable energy, with solar and wind energy capacity expansion playing a crucial role in achieving India’s net-zero emission goals.
Private sector investment is also on the rise, supported by government incentives such as the Production-Linked Incentive (PLI) scheme. The survey recommends further measures to improve the ease of doing business and attract foreign direct investment (FDI) in high-growth sectors.
Medium-Term Economic Outlook
India aims to achieve an 8% growth rate in the coming decades to realize its vision of becoming a ‘Viksit Bharat’ (Developed India) by 2047. The IMF projects India to become a USD 5 trillion economy by FY28 and USD 6.3 trillion by FY30, with an average nominal growth rate of 10.2% per annum.
Key policy recommendations include:
- Reducing regulatory compliance burdens to enhance ease of doing business.
- Strengthening domestic manufacturing to reduce import dependency.
- Encouraging financial sector innovations and digital financial inclusion.
- Enhancing food security by promoting climate-resilient agriculture.
- Expanding investment in research and development (R&D) to drive technological innovation.
- Strengthening India’s startup ecosystem by improving access to venture capital and funding opportunities.
Social Sector Initiatives
The survey also sheds light on key social sector developments, particularly in education, healthcare, and employment. The National Education Policy (NEP) has made significant strides in improving learning outcomes and expanding access to quality education. The Pradhan Mantri Jan Arogya Yojana (PM-JAY) has continued to provide healthcare coverage to millions, reducing out-of-pocket medical expenses.
Employment generation remains a priority, with new initiatives aimed at skill development and vocational training. The government’s focus on empowering women and marginalized communities is reflected in increased budgetary allocations for social welfare programs.
Conclusion
The Economic Survey 2024-25 underscores India’s economic resilience and growth potential amidst global challenges. With prudent monetary policies, structural reforms, and continued focus on financial inclusion and industrial expansion, India is well-positioned to maintain its growth momentum and achieve long-term economic stability. The government’s strategic emphasis on infrastructure, digital economy, and social sector investments will play a crucial role in shaping India’s economic future in the coming years.
