New Delhi, 31 January 2025: The Indian economy is expected to grow between 6.3% and 6.8% in FY 2025-26, according to the Economic Survey 2024-25 presented in Parliament by Finance Minister Nirmala Sitharaman on Friday.
The survey, released ahead of the Union Budget 2025-26, attributes this outlook to strong domestic economic fundamentals, a declining unemployment rate, and stable inflation, while also stressing the need for further reforms to sustain growth momentum.
“India’s economic fundamentals remain robust, with a strong external account, calibrated fiscal consolidation, and stable private consumption. Based on these factors, we estimate GDP growth in FY26 to be between 6.3% and 6.8%,” the survey states.
The projected GDP growth, however, would be the lowest since FY 2020-21, when the economy contracted by 5.8% due to the pandemic.
In the following years, GDP growth rebounded to 9.7% in 2021-22, 7% in 2022-23, and 8.2% in 2023-24. Sitharaman is set to present the Union Budget 2025-26 on Saturday.
Key Points from the Economic Survey:
Economic Resilience: Indian economy remains strong with a stable external account and robust private consumption.
Inflation Outlook: Food inflation is expected to ease in Q4 FY25 due to seasonal declines in vegetable prices and Kharif harvest arrivals.
Global Headwinds: Economic growth could face challenges from geopolitical tensions and trade uncertainties, requiring strategic policy management.
Reforms and Competitiveness: India needs grassroots-level structural reforms and deregulation to enhance global competitiveness.
Inflation Risks: Higher commodity prices pose limited inflation risks in FY26, though geopolitical uncertainties remain a concern.
AI and Governance: The absence of a governance framework for AI may lead to potential misuse of the technology.
Corporate Bond Market: Entry barriers, information asymmetry, and the lack of a secondary market must be addressed to boost corporate bond market liquidity.
Rupee and Global Market Risks: Rupee depreciation in 2024 was primarily due to a strong US dollar amid geopolitical tensions and US election uncertainties.
Market Corrections: A meaningful market correction in 2025 could have a cascading effect on India, particularly due to higher participation from new retail investors.
Insolvency and Debt Resolution: The deterrent effect of insolvency laws has prompted thousands of debtors to resolve financial distress at early stages.
The survey underscores that sustaining growth will require prudent policymaking, strengthening domestic fundamentals, and navigating external risks while pushing forward with structural reforms.