Beyond the Numbers: What the Economic Survey 2024-25 Means for India’s Future
~ Paras Jasrai
It’s budget season in India. The season begins with the union government presenting the budget for the forthcoming financial year (FY) on 01 February which is followed by the presentation of budgets by respective states till March/April. However, before the presentation of the union budget, the government of India usually comes out with a detailed report (The Economic Survey) presenting the official assessment of the Indian Economy. It is a crucial document as it discusses some key core issues and the economic situation setting the stage for policy discourse in India. This year’s survey presents a cautiously optimistic outlook, with a GDP growth projection of 6.3% to 6.8% for FY26, a resilient services sector, stable inflation, and increasing concerns about employment and equity markets. But beyond these numbers, what does the survey mean for public policy? Let’s unpack some of its key themes in this month’s edition.
1. Growth, Stability, and the Road Ahead
India’s GDP growth rate for FY25 signals steady momentum, but there is an underlying shift in priorities. While the economy has recovered swiftly from the pandemic and navigated shocks in a robust manner, policymakers need to address looming risks—geopolitical uncertainties, potential commodity price shocks, and financial market volatility. A key takeaway is the importance of maintaining macroeconomic stability while ensuring growth remains inclusive.
One policy implication is the need for a calibrated fiscal strategy. With tax revenues buoyed by GST collections and formalisation, the government has some room for targeted spending on infrastructure, skilling, and social protection. However, given global headwinds, policymakers must strike a balance between fiscal prudence and economic support.
2. The Employment Challenge: A Call for Job Creation
The survey underscores the pressing need for job creation, particularly in the non-farm sector. By 2030, India will need to generate approximately 7.85 million jobs annually. While the services sector has been a key driver of employment, the manufacturing sector must also step up. The survey subtly nudges policymakers towards deeper labour market reforms and sectoral strategies that enhance productivity.
The larger question here is: how can India create high-quality jobs? Public policy must focus on micro, small, and medium enterprises (MSMEs), which contribute significantly (over 60%) to employment but often struggle with regulatory burdens and credit constraints. Skill development programmes must also align with evolving industry needs, especially in digital and green economy sectors.
3. Inflation and Monetary Policy: A Delicate Balancing Act
Retail inflation eased to 5.2% in December 2024, a significant improvement from the previous year’s 6.7%. While this offers some relief, food inflation remains a persisting challenge. The survey suggests that inflation management will require coordinated fiscal and monetary policy action.
From a policy standpoint, inflation control must go beyond interest rate adjustments. Supply-side measures—such as improving agricultural logistics, reducing input costs, and enhancing productivity—are equally critical. With a potential interest rate cut on the horizon, policymakers must ensure that inflation does not spiral again, especially given the volatility in global commodity prices and the vagaries of climate change (January 2025 has been unusually warmer in northern regions).
4. Financial Markets: Retail Investor Boom and Systemic Risks
A striking highlight of the survey is the rapid rise of retail participation in stock markets. While this reflects rapid digitalisation, growing financial literacy, and expanding investment opportunities, it also raises concerns about systemic risks. The survey warns that a sharp correction in equity markets could dampen investor sentiment and affect household consumption patterns (through the wealth effect).
This calls for a balanced regulatory approach. While capital markets must remain accessible, financial regulators need to ensure adequate safeguards against excessive speculation and over-leveraging by retail investors. Investor education and risk awareness initiatives should become central to India’s financial inclusion strategy.
5. Foreign Direct Investment (FDI): The Global Context Matters
FDI inflows stood at $45.8 billion in FY24, slightly lower than the previous year’s $47.6 billion. This trend mirrors global patterns, as investment flows have been impacted by economic slowdowns in key markets. Policymakers must now focus on making India a more attractive investment destination by streamlining regulations and reducing policy uncertainty.
One key area for reform is regulatory impact assessment. The survey advocates for formalised assessments of regulations to enhance transparency and predictability. By institutionalising such practices, India can strengthen investor confidence and improve ease of doing business.
6. Climate Resilience: An Urgent Economic Imperative
The survey also places greater emphasis on climate risks, recognising that a significant portion of India’s GDP is linked to climate-sensitive sectors. Given the increasing frequency of extreme weather events, policymakers must prioritise adaptation strategies alongside mitigation efforts.
One way forward is to integrate climate considerations into economic planning. This includes scaling up green finance, incentivising renewable energy adoption, and ensuring urban infrastructure is resilient to climate shocks. While India has made strides in sustainability, a clear long-term roadmap is needed to align economic growth with climate action.
The Bigger Picture: A Policy Agenda for the Future
The Economic Survey 2024-25 paints a picture of an economy that is growing but also facing critical challenges. Whether it is job creation, inflation management, financial stability, investment flows, or climate resilience, public policy decisions in the coming year will shape India’s trajectory.
For policymakers, the focus should be on a) strengthening the non-farm job market with targeted labour and skilling policies, b) maintaining a delicate balance between fiscal support and macroeconomic stability, c) enhancing financial market safeguards while promoting financial inclusion, d) improving investor confidence through transparent regulatory practices and e) prioritising climate resilience as a core economic strategy.
The survey also provides insights into the medium-term outlook for the Indian economy. It highlights that while India’s growth potential remains strong, sustaining high growth will require continuous structural reforms and policy support. The survey also warns about potential drags on medium-term growth, such as slowing global demand, climate change-related disruptions, and structural bottlenecks in labour markets. To mitigate these risks, policymakers will need to focus on enhancing productivity, streamlining business regulations, and fostering innovation in key sectors like renewable energy, technology, and healthcare.
As India enters a crucial phase of economic transition, these policy priorities will determine how well the country navigates both immediate challenges and long-term aspirations. The Economic Survey serves as a guidepost, but it is the implementation of these insights that will ultimately shape India's future and the ambition of Viksit Bharat by 2047. Viksit Bharat till 2047 requires having 8%+ growth rates continuously for two decades, notably economic growth is expected to be below 7% in FY25 and FY26, indicating the arduous task ahead of us.
Note: These are author’s personal views.