Economic Survey 2024-25: State of the Economy | 31 Jan 2025

Source: PIB 

Why in News? 

• The Finance Minister Nirmala Sitharaman tabled the Economic Survey 2024-25 in Parliament, It provides a roadmap for reforms and growth, setting the stage for the Union Budget 2025. 

What are the Key Highlights of the Economic Survey 2024-25: State of the Economy? 

• Global Economy: The global economy in 2024 experienced moderate but uneven growth, with the International Monetary Fund (IMF) projecting 3.2% growth for the year, with a slowdown in manufacturing due to supply chain disruptions while the services sector remained strong.  
  • Inflation eased globally, yet services inflation remained persistent, leading to divergent monetary policies across central banks.  
• India’s Economy: India's Gross domestic product (GDP) is projected to grow between 6.3-6.8% in FY26 (2025-26). 
  • India’s real GDP is estimated to grow by 6.4% in FY25 (2024-25), driven by agriculture and services, while manufacturing faces challenges.  
• Sector-Wise Performance: 
  • Agriculture: 3.8% growth in FY25, driven by record Kharif production and strong rural demand. 
  • Industry & Manufacturing: 6.2% growth in FY25, with manufacturing slowing due to weak global demand. 
  • Services: Fastest-growing sector at 7.2% in FY25, led by Information technology, finance, and hospitality.  
  • External Sector: Overall exports (merchandise+services) grew by 6% (YOY) in the first nine months of FY25. Services sector by 11.6% during the same time.
    • Merchandise exports grew 1.6%, while imports rose 5.2%, widening the trade deficit.
    • India remained the top global recipient of remittances, helping contain the current account deficit at 1.2% of GDP. 
    • Overall, India’s economic outlook remains positive, driven by domestic resilience and structural reforms, though risks from global uncertainties persist. 

What are the Challenges Facing India’s Economy? 

• Geopolitical Uncertainties: Russia-Ukraine war and Israel-Hamas conflict have impacted trade, energy security, and inflation. 
  • Suez Canal disruptions forced ships to reroute via the Cape of Good Hope, increasing freight costs and delivery times. 
  • Trade policy risks and protectionism in major economies impact India’s exports and supply chains. 
• Inflation and  Investment: Global inflation easing, but risks of synchronized price increases persist. 
  • Food inflation remains a concern, driven by weather shocks and supply chain disruptions . 
  • Weak global manufacturing demand has pressured India’s manufacturing sector, slowing private investment. 
• Financial Risks: State fiscal stress due to rising subsidies, lower tax collections, and dependency on central transfers. 

Way Forward 

• Managing Geopolitical Uncertainties: Diversify trade routes and partners to reduce dependency on conflict-affected regions. 
  • Strengthen energy security by increasing domestic renewable energy production and securing long-term import agreements. 
  • Enhance trade resilience through bilateral agreements and participation in global supply chain diversification. 
• Controlling Inflation: Expand food buffer stocks and strengthen supply chains to stabilize food prices. 
  • Promote climate-resilient agriculture to mitigate weather-related price shocks. 
  • Encourage private sector investment through incentives, tax reforms, and ease of doing business initiatives. 
• Strengthening Financial: Improve tax collection mechanisms to enhance state revenues and reduce dependency on central transfers. 
  • Rationalize subsidies and implement targeted welfare schemes to ensure fiscal discipline. 
  • Encourage states to adopt fiscal responsibility measures for long-term economic sustainability. 

Read more: Economic Survey 2024-25