Context:
The Economic Survey 2024-25 presented to the Parliament on the eve of the Union Budget highlights top economic priorities focused on deregulation business reforms and resilience at a time of global uncertainty.
Key Highlights:
- Deregulation as Catalyst for Growth
- Support reducing regulatory hurdles particularly on the states level in order to spur capital formation create jobs and enhance economic performance.
- Calls on the government to take a step back and let companies focus on innovation and competitiveness. It feels that costs for doing business are the only element that can sustain a high growth level.
Economic Growth Outlook
- 6.3-6.8 GDP expected in FY26 similar to the 6.4 estimate for FY25.
- Lags behind the 8% growth required to meet the Viksit Bharat vision by 2047.
- Global agency projections
- IMF Fitch Ratings: 6.5%
- World Bank: 6.7%
- ADB: 7.0%
Real GDP Growth
- Growth Now
- Indian real GDP growth for FY25 is expected to be at 6.4%, in line with the decadal average.
- Future
- It is likely to be steady as FY26 is projected in the range of 6.3% to 6.8%.
FDI Inflows
- Slowing FDI
- Net FDI inflows slow down during the first eight months of FY25 mainly because of the rise in repatriation and disinvestment.
- Year-over-Year Comparison
- Overall, FDI decreased in FY24 as compared to the previous years and shows deceleration of foreign investments.
Inflation
- Food Inflation
- Food inflation based on CFPI increased from 7.5% in FY24 to 8.4% in FY25 (April-December) as a result of increased price of vegetables and pulses.
- Retail Inflation
- CPI-based retail inflation has been arriving at 5.4% above the comfort level of the RBI at 4%. Items like onions and tomatoes have moved up at an incredible rate, and it also crossed 8%.
Manufacturing PMI
- Sector Revival
- The manufacturing sector is reviving but remains a little shy of pre-pandemic times due to a global demand slowdown and supply chain disruptions.
Foreign Exchange Reserves
- Holdings Position
- Reserves of the foreign exchange stand at $640.3 billion as of December 2024, which works out to covering 90% of India’s external debt amounting to $711.8 billion as of September 2024.
Labour Market Indicators
- Labour Market Growth
- Growth in the labour market has also been due to post-pandemic recovery and formalisation. The unemployment rate decreased from 6% during 2017-18 to 3.2% in 2023-24.
Trade Performance
- Export and Import Trends
- In FY24, exports and imports declined by 0.1% and 2.3%, respectively. However, in FY25 (April to December), exports increased by 6.6% and imports by 3%.
UPI Payments
- Exponential Growth
- UPI payments have seen a significant growth rate, with a total value of nearly ₹2 lakh billion in FY24 and ₹1.9 lakh billion from April to December in FY25.
Global Trade Economic Uncertainty
- Increasing protectionism and trade disruptions are a challenge to India’s economic path.
- These steps include active policy measures to address external vulnerabilities and sustain competitiveness in global trade.
Ease of Doing Business 2.0
- The third wave of the report is also known as Ease of doing business 2.0 which proposes another wave of business reforms in simplifying rules and attracting investment. The enhancement of India’s business environment reduces bureaucratic inefficiency and focuses support on entrepreneurs and MSMEs through streamlined procedures.
AI’s Impact on Jobs
- Warns of Artificial Intelligence
- AI disrupting labor markets and urges responsible adoption.
- Suggests that irresponsible AI deployment could lead to policy interventions taxation.
- Recommends worker protection measures to cushion the impact of automation.
Structural Reforms Inclusive Growth
- Stresses the need for labor reforms to drive sustainable job creation.
- Warns against excessive financialization which can destabilize the real economy. PM Modi hints at some new welfare measures for women the poor and the middle class in the upcoming budget.
Source: The Hindu
