ECONOMIC SURVEY, 2025
The Economic Survey is an annual report released by the Indian government, providing a comprehensive analysis of the country’s economic performance over the past year and forecasts for the future. Key points include:
- Coverage: It addresses various topics like GDP growth, inflation, employment, agriculture, industry, and infrastructure.
- Preparation: The Ministry of Finance, specifically the Department of Economic Affairs, is responsible for its preparation.
- Presentation: The survey is presented to Parliament by the Finance Minister, typically a day before the Union Budget.
- Importance: It serves as an important resource for policymakers, businesses, and researchers.
- Policy Formation: It plays a crucial role in shaping the government’s economic
CHAPTER 1: GLOBAL ECONOMIC CONDITION & DOMESTIC ECONOMIC CONDITION [1/2]
In 2024, the global economy saw steady but uneven growth across regions. Manufacturing slowed down, especially in Europe and parts of Asia, due to supply chain issues and weak demand.
However, the services sector performed better, helping many economies grow. Inflation eased in most places, but services inflation remained high. While commodity prices stabilized, there was still a risk of price increases.
Central banks may adjust their policies differently, creating uncertainty about future rates and inflation. Geopolitical tensions and trade risks also remained challenges for global stability.
In India, the economy grew steadily with an estimated 6.4% GDP growth for FY 25.
KEY HIGHLIGHTS OF THE INDIAN ECONOMY
- Agriculture and services supported growth, while manufacturing faced challenges due to weak global demand.
- Private consumption remained stable.
- India’s strong fiscal management, healthy external balance, and remittance growth helped maintain economic stability.
- Looking ahead, India’s growth prospects for FY26 are balanced, with challenges like geopolitical uncertainties and possible commodity price shocks.
- Key factors for growth include stronger investment, improved consumer confidence, and rising rural demand.
- India will need structural reforms to boost its global competitiveness and ensure long-term growth.
GLOBAL ECONOMIC CONDITIONS
- Factors: The global economy is affected by changing growth rates, changing prices of goods like oil and metals, and changes in money policies.
- Impact: These factors affect prices, trade, and money flow in countries.
- Complications: The current situation is made more complex by political issues, supply chain problems, and climate-related shocks.
Global Economic Growth:
- 2023 Growth: The global economy grew by 3.3% in 2023.
- IMF Projections: The IMF expects global growth of 3.2% for 2024 and 3.3% for 2025.
- Long-Term Outlook: Over the next 5 years, global growth is expected to be around 3.2%, which is lower than in the past.
GLOBAL ECONOMIC SCENARIO
2024 Events:
a. Elections: More than half of the world’s people voted in major elections, showing a lot of political activity.
b. Conflicts: The Russia-Ukraine and Israel-Hamas conflicts made some regions unstable, affecting energy and food security and causing higher prices and inflation.
c. Cyberattacks: More cyberattacks happened because of the use of technology in important systems, causing big risks.
ADVANCED ECONOMIES
a. Stable Growth: Rich countries had stable growth in the first half of 2024 despite higher interest rates, due to lower inflation and steady jobs and spending.
b. US Growth: The US is expected to grow by 2.8% in 2024, with a slight drop in 2025 due to less spending and exports.
c. Euro Area Growth: Europe’s growth is expected to improve from 0.4% in 2023 to 0.8% in 2024 and 1.0% in 2025, due to better services. However, growth is different in various European countries, with some facing challenges.
ASIAN ECONOMIES
a. Japan: Japan’s growth was slowed by local supply issues in early 2024.
b. China: China’s growth slowed after the first quarter of 2024 due to weak spending and investment, and issues in the real estate market.
GLOBAL MANUFACTURING & SERVICES
a. Composite PMI: The global composite PMI has been in the growth zone for 14 months straight as of December 2024, showing steady economic activity.
b. Services Sector: The services sector is strong, with the global Services PMI rising to a four-month high of 53.8 in December 2024, showing growth for 23 months straight.
c. Manufacturing PMI: The manufacturing PMI showed a slowdown, stabilizing in November 2024 with a value of 50.0, showing no overall change. Growth in consumer and intermediate goods offset a drop in investment goods.
INFLATION
- Trend: Inflation rates have been dropping steadily, getting closer to the targets set by central banks.
- 2023: Prices dropped in 2023 due to lower fuel prices.
- 2024: In 2024, inflation was due to a broad drop in goods prices.
- Disinflation: The process of lowering inflation has slowed due to persistent services inflation, while core goods inflation has dropped to very low levels.
- The IMF notes that higher wage growth compared to before the pandemic has added to these pressures, but there are signs that these pressures are easing.
- Monetary Policy:
- Policy Pivot: Major central banks have lowered interest rates, taking advantage of the drop in inflation.
- Uncertainty: There is uncertainty about future interest rates across countries. The pace of rate cuts is different due to varying economic conditions.
- Commodity Prices:
- Forecast: Commodity prices are expected to drop slightly after softening in 2024.
- Risk: The risk of big price increases remains due to political tensions and extreme weather events.
- Sovereign Bond Yields:
- Trend: Bond yields in rich countries dropped between April and September 2024, showing expectations of lower borrowing costs. However, uncertainty pushed bond yields up in October-December 2024.
- China: Lower growth and deflation in China have pushed Chinese bond yields lower, widening the gap between the US and Chinese bond yields.
Domestic Economy
- GDP Growth:
- FY25 Estimate: The real GDP growth for FY25 is estimated to be 6.4%.
- Private Consumption: Private spending is estimated to grow by 7.3%, driven by a recovery in rural areas.
- Gross Fixed Capital Formation: Estimated to grow by 6.4%, showing strong investment activity.
- Sectoral Growth:
- Agriculture: Agriculture is expected to grow by 3.8% in FY25, supported by good crop production and normal rainfall.
- Industrial Sector: Estimated to grow by 6.2% in FY25, driven by strong growth in construction and utility services.
- Services Sector: Expected to grow by 7.2%, driven by good activity in finance, real estate, public services, and defense.
- Recovery Trends:
- Aggregate GVA: Overall economic value added (GVA) surpassed pre-pandemic levels in Q1 FY25 and remains above those levels in the first half of FY25.
- Construction and Utilities: These sectors are doing well above pre-pandemic levels, driven by strong infrastructure development and housing demand.
- Manufacturing and Mining: These sectors are still recovering, with manufacturing slightly below pre-pandemic levels and mining below pre-pandemic levels.
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