Eco Survey Sees Sluggish Growth

India will need to improve its global competitiveness through grassroots-level structural reforms and deregulation to reinforce its medium-term growth potential - Economic Survey 2024-25

New Delhi: Economic Survey 2024-25 has expressed cautious optimism for the next fiscal. Estimating growth at 6.4 per cent in 2024-25, slightly below its decadal average, it has projected a rise in GDP between 6.3 and 6.8 per cent in 2025-26. The decadal average excludes the pandemic years of 2020-21 and 2021-22.

Meanwhile, the global economy grew by 3.3 per cent in 2023. However, global geopolitical tensions, ongoing conflicts, and trade policy risks continue to pose challenges to economic growth worldwide.

“India will need to improve its global competitiveness through grassroots-level structural reforms and deregulation to reinforce its medium-term growth potential,” said the Survey, which was tabled in Parliament by Finance Minister Nirmala Sitharaman.

According to the report, capital expenditure saw continuous improvement from 2020-21 to 2023-24. Following the general elections, capex grew by 8.2 per cent year-on-year from July to November 2024.

“India’s external sector continued to display resilience amidst global headwinds of economic and trade policy uncertainties,” the Survey said. Overall exports, including merchandise and services, grew by six per cent in the first nine months of 2024-25, with services exports rising by 11.6 per cent during the same period.

The current account deficit (CAD) stood at 1.2 per cent of GDP in the second quarter of the current fiscal, supported by higher net services receipts and increased private transfer inflows. Gross foreign direct investment (FDI) inflows revived in 2024-25. India’s foreign exchange reserves reached $640.3 billion by December 2024.

Banking sector performance has remained robust, with steady credit growth aligning with deposit growth, it said. Scheduled commercial banks have shown improved profitability, reflected in declining gross non-performing assets and a higher capital-to-risk-weighted asset ratio.

Indian stock markets have outperformed their emerging market counterparts. The insurance sector continued its upward trajectory. Similarly, the pension sector witnessed significant expansion, with the total number of pension subscribers growing by 16 per cent as of September 2024.

Retail inflation declined from 5.4 per cent in the first nine months of 2023-24 to 4.9 per cent in the same period this fiscal.

“The focus of reforms and economic policy must now be on systematic deregulation,” the Survey said. This is necessary to empower individuals and businesses by simplifying legal frameworks, reducing tariffs, and implementing risk-based regulations, it added.

Over the past five years, the government has prioritized public infrastructure spending, accelerating approvals, and resource mobilization. The Union Government’s capital expenditure on key infrastructure sectors grew at a rate of 38.8 per cent from 2019-20 to 2023-24. However, public sector investment alone is inadequate to meet infrastructure demands, necessitating private sector participation. Initiatives such as the National Infrastructure Pipeline and National Monetization Pipeline have been established to encourage private sector involvement.

The industrial sector is projected to grow by 6.2 per cent in 2024-25, driven by strong performance in electricity and construction. Additionally, as per the WIPO Report 2022, India ranked sixth among the top 10 patent-filing offices globally, reflecting innovation and technological advancements.

The MSME sector has emerged as a vital component of the Indian economy. To support MSMEs with growth potential, the government launched the Self-Reliant India Fund with a corpus of Rs 50,000 crore. Additionally, the Micro and Small Enterprises-Cluster Development Programme is being implemented to promote cluster-based growth.