Article: India projects 6.4% real GDP growth for FY25 amidst global headwinds

Economy & Policy

India projects 6.4% real GDP growth for FY25 amidst global headwinds

India's economy is projected to grow by a robust 6.4% in FY25, fueled by strong performances in agriculture and services. Job growth is also on the upswing, though continued progress hinges on key structural reforms, according to India Economic Survey 2025.
India projects 6.4% real GDP growth for FY25 amidst global headwinds

India's economy is projected to grow by 6.4% in the fiscal year 2024-25, according to the first advance estimates presented in the Economic Survey released today. This robust growth forecast comes despite a challenging global economic landscape marked by geopolitical uncertainties, fluctuating commodity prices, and evolving monetary policies.

The survey released ahead of the Union Budget, highlights the resilience of the Indian economy, driven by strong performances in agriculture and services, coupled with steady domestic demand. "Growth in the first half of FY25 was supported by agriculture and services, with rural demand improving on the back of record Kharif production and favourable agricultural conditions," the survey noted. Private consumption also remained stable, reflecting healthy domestic demand.

However, the Economic Survey cautions that India's growth trajectory faces significant headwinds. "Geopolitical tensions, ongoing conflicts, and trade policy risks continue to pose significant challenges to global economic stability," the report warns. The ongoing Russia-Ukraine conflict and the recent Israel-Hamas conflict, along with rising protectionism, are cited as key factors that could impact global growth and, consequently, India's economic prospects.

While the services sector continues to be a bright spot, the manufacturing sector is facing pressures due to weak global demand and domestic seasonal conditions. The survey pointed out that manufacturing exports have slowed significantly due to weaker demand from destination countries. However, it also expresses optimism for a recovery in manufacturing, citing positive expectations and a healthy manufacturing PMI.

Unemployment falls, formal jobs surge

On the employment front, the survey highlights a surge in formal jobs and a decline in unemployment.  The 2023-24 Periodic Labour Force Survey (PLFS) shows unemployment for those aged 15 and above has dropped from 6% in 2017-18 to 3.2% in 2023-24. Urban unemployment also improved slightly in Q2 FY25, falling to 6.4% from 6.6% a year ago. Both the labour force participation rate (LFPR) and worker-to-population ratio (WPR) have also risen, signalling stronger workforce engagement.

Formal jobs are surging, with net EPFO subscriptions more than doubling from 61 lakh in FY19 to 131 lakh in FY24. Between April and November 2024, 95.6 lakh workers joined, nearly half aged 18-25, highlighting a shift towards secure employment. Government efforts are accelerating this formalisation, expanding social security coverage.

Meanwhile, AI is reshaping the job market. With India’s services-driven economy and young workforce, AI adoption could fuel growth—if skill development keeps pace. The report stresses the need to equip workers for an AI-integrated future, ensuring human-machine collaboration drives employment rather than displacing it.

FY26 growth outlook

Looking ahead to FY26, the Economic Survey projects GDP growth between 6.3% and 6.8%. While acknowledging potential upsides from domestic investment and easing inflation, it also stresses the importance of addressing global uncertainties. The report calls for grassroots-level structural reforms and deregulation to improve India's global competitiveness and reinforce its medium-term growth potential. It underscores the need for strategic and prudent policy management to navigate the complex global economic environment.

The budget is expected to reflect the priorities and policy directions outlined in the survey, setting the stage for India's economic trajectory in the coming fiscal year.

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Topics: Economy & Policy, #Budget2025

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