Economic Survey projects India’s GDP growth at 6.5-7 pc in FY25

NEW DELHI — The Economic Survey 2023-24, which was tabled in Parliament on Monday, projected India’s GDP to grow at 6.5-7 per cent in 2024-25, down from a high of 8.2 per cent in the the preceding financial year, while cautioning that escalation of geopolitical conflicts may have bearing on growth prospects.

Finance Minister Nirmala Sitharaman, who tabled the Economic Survey, will present the Union Budget in the Lok Sabha on Tuesday morning.

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The projection in the Economic Survey is a tad lower than the Reserve Bank’s growth estimates of 7.2 per cent. However, major global agencies, including the IMF and ADB, have projected the growth at 7 per cent.

The key economic document also suggested that the Reserve Bank of India (RBI) should stop looking at food inflation in deciding interest rates and the government should explore giving coupons or direct cash transfer to poor to deal with higher food prices.

“…the Survey conservatively projects a real GDP growth of 6.5-7 per cent, with risks evenly balanced, cognizant of the fact that the market expectations are on the higher side,” the pre-Budget document said.

A normal rainfall forecast by the India Meteorological Department and the satisfactory spread of the southwest monsoon thus far are likely to improve agriculture sector performance and support the revival of rural demand.

However, the monsoon season still has some way to go, the document said, adding that structural reforms such as the GST and the IBC have also matured and are delivering envisaged results.

The Survey, authored by a team led by Chief Economic Advisor V Anantha Nageswaran, said domestic growth drivers have supported economic growth in FY24 despite uncertain global economic performance.

Improved balance sheets will help the private sector cater to strong investment demand.

“A note of caution is warranted here. Private capital formation after good growth in the last three years may turn slightly more cautious because of fears of cheaper imports from countries that have excess capacity,” it said.

On the downside, the Survey said any escalation of geopolitical conflicts in 2024 may lead to supply dislocations, higher commodity prices, reviving inflationary pressures and stalling monetary policy easing with potential repercussions for capital flows. This can also influence the RBI’s monetary policy stance.

The pre-Budget document said also said the outlook for India’s financial sector appears bright, but there is a need to keep a tight vigil on vulnerabilities as India can ill-afford the over-financialisation of the economy at this stage.

The Indian financial sector is at a “turnpike moment”, it said, adding that the dominance of banking support to credit is being reduced, and the role of capital markets is rising.

Further, it said a higher level of private sector financing and resource mobilisation from new sources will be crucial for India to build quality infrastructure.

Nageswaran, in the preface to the Economic Survey, also called for a pan-India dialogue on the agriculture sector, highlighting the need for policy re-orientation despite existing subsidies and support measures.

He noted that while the government provides substantial support to farmers through subsidies on water, electricity, and fertilisers, along with income tax exemptions and minimum support prices, there is room for improvement in policy implementation.