An Optimistic Assessment

The Economic Survey for 2024-25 is a positive and forward-looking assessment of the Indian economy for the current financial year. It does much to lift the pall of gloom after GDP data for the second quarter was released in November last year, casting doubts over India’s growth prospects.

Three takeaways from the Survey stand out.

One, the Indian economy will continue to outperform its peers in 2024-25 and 2025-26 with growth rates of 6.4% and from 6.3% to 6.8%, respectively. These are not mean numbers and are almost double the rate of expected global growth during these years.

Two, inflation in India is likely to moderate in the last quarter of 2024-25 on the back of good Kharif crop arrivals that are likely to continue into the first half of 2025-26 with a good Rabi crop. Rural growth and consumption are positive stories of the last one year. The Survey mentions growth in agricultural output as a big reason for rural growth. But it is also a fact that in recent years, the Centre has pumped very large sums into India’s rural economy that has given consumption a boost. Together, output growth and welfare programmes have lifted rural India.

Three, the fiscal discipline and quality of expenditure at the Centre has improved markedly since 2021-22. This is a quiet assertion that the Centre is likely to stick to its promise of fiscal discipline and maintain its path of fiscal consolidation. This is not an easy task given the multiple demands on the same set of resources: increased capex, a consumption boost as well as fiscal discipline. At some point one of these considerations will have to give way.

The Survey is not a mere positive spin on what the government is doing. Its assessments of global risks (Chapter 1) and the heavy emphasis on deregulation as a prerequisite for India to grow faster (Chapter 5) tell a story that India cannot continue growing unless it takes corrective steps soon. The issue of managing dwindling Foreign Direct Investment (FDI) inflows and optimising existing investments need careful attention and policy changes if India is to get back to a 7% and higher growth. This is not impossible but it is not easy either.

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