The Economic Survey 2024-25 is prepared this year also by the team led by Dr. V. Anantha Nageswaran, Chief Economic Adviser, Government of India, one can expect even worse performance of the economy of the country, given the track record of his teams earlier projections. For example, The Indian Economy: A Review, January 2024 has said, “It now appears very likely that the Indian economy will achieve a growth rate at or above 7% for FY24, and some predict it will achieve another year of 7% real growth in FY25 as well.” Nevertheless, Economic Survey 2024-25 says, “As per the first advance estimates of national accounts, India’s real GDP is estimated to grow by 6.4 per cent in FY25.”

All these indicate a bitter economic ground reality, and we may well conclude that the Economic Survey 2024-25 tries its best to generate hope that economic slowdown may not be much worse, but could grow by between 6.3 to 6.8 per cent, in the given national and internationals upside and downside risks.

Before going into detains of the Survey, it is worth noting that the Congress on January 30 had come out with a ‘Real State of the Economy’ report claiming that the Modi government is "marching India forward into the middle-income trap, which will make the country uncompetitive, under productive and unequal". The Modi government appears focused on enriching his coterie of corporate supporters, said their document.

How to overcome the challenges of the economy ahead. Chief Economic Advisor (CEA) Dr V Anantha Nageswaran has laid down his perspective, and suggested that lowering the cost of business through deregulation will make a significant contribution to accelerating economic growth and employment amidst unprecedented global challenges.

It would need huge domestic and foreign investment to make India competitive and innovative economy, CEA has said, adding that it would not be easy because competition for investment is not only with other emerging economies but advanced economies, too, who are determined to keep their business at home.

“Getting out of the way” and allowing businesses to focus on their core mission is a significant contribution that governments around the country can make to foster innovation and enhance competitiveness, CEA has suggested, adding that the most effective policies governments - Union and States – in the country can embrace is to give entrepreneurs and households back their time and mental bandwidth. That means rolling back regulation significantly.

Looking ahead, the Economic Survey 2024-25 asserts that India’s economic prospects for FY26 are balanced. Headwinds to growth include elevated geopolitical and trade uncertainties and possible commodity price shocks. Domestically, the translation of order books of private capital goods sector into sustained investment pick-up, improvements in consumer confidence, and corporate wage pick-up will be key to promoting growth. Rural demand backed by a rebound in agricultural production, an anticipated easing of food inflation and a stable macro-economic environment provide an upside to near-term growth.

Though real GDP is likely to slip to 6.4 per cent in the FY25, Economic Survey 2024-25 also asserts that domestic economy remains steady amidst global uncertainties. From the angle of aggregate demand, it says, private final consumption expenditure at constant prices is estimated to grow by 7.3 per cent, driven by a rebound in rural demand. (Private Final Consumption Expenditure (PFCE) as a share of GDP (at current prices) is estimated to increase from60.3 per cent in FY24 to 61.8 per cent in FY25. This share is the highest since FY03.Gross fixed capital formation (GFCF) (at constant prices) is estimated to grow by 6.4 per cent.

On the supply side, real gross value added (GVA) is also estimated to grow by6.4 per cent. The agriculture sector is expected to rebound to a growth of 3.8 per cent in FY25. The industrial sector is estimated to grow by 6.2 per cent in FY25. Strong growth rates in construction activities and electricity, gas, water supply and other utility services are expected to support industrial expansion. Growth in the services sector is expected to remain robust at 7.2 per cent, driven by healthy activity in financial, real estate, professional services, public administration, defence, and other services.

The slowdown in investment activity is likely temporary, it says. Green shoots in capital formation are visible. Union government capex is up 8.2 per cent in July – November 2024and is expected to pick up further pace. Early results of the RBI’s Order Books, Inventory, and Capacity Utilisation Survey (OBICUS) show that the seasonally adjusted capacity utilisation (CU) in manufacturing firms was 74.7 per cent in Q2 FY25, above the long-term average of 73.8 per cent.

On the external front, exports of goods and non-factor services at constant prices increased by 5.6 per cent in H1 FY25, while imports increased by 0.7 per cent. In Q2FY25, imports of goods and services at constant prices contracted by 2.9 per cent, primarily driven by a decline in commodity prices. As a result, net exports contributed positively to real GDP growth in this period.

India’s foreign exchange reserves increased from USD 616.7 billion at the end of January 2024 to USD 704.9 billion in September 2024 before moderating to USD 634.6 billion as on 3 January 2025. India’s forex reserves are sufficient to cover 90 per cent of external debt and provide an import cover of more than ten months, thereby safeguarding against external vulnerabilities.

The survey hopes easing of inflationary pressure, and improvement in the job market. There are many upsides to domestic investment, output growth and disinflation in FY26. However, there are equally strong, prominently extraneous, downsides too, it noted. Nonetheless, the fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption. On balance of these considerations, we expect that the growth in FY26 would be between 6.3 and 6.8 per cent, Economic Survey 2024-25 asserted. (IPA Service)