Projected Economic Growth

• India’s economy is expected to grow between 6.3% to 6.8% in the financial year 2025-26 (FY26).
• This forecast comes from the Economic Survey 2024-25 presented by Finance Minister Nirmala Sitharaman in Parliament.

Economic Fundamentals

• The survey highlights that the domestic economic fundamentals remain robust with a strong external account, stable private consumption, and calibrated fiscal consolidation.
• Unemployment rates are decreasing, and inflation is stable, which supports the optimistic growth outlook.

Growth Comparison

• The projected growth rate of 6.3% to 6.8% is the lowest since FY21 (the COVID-19 year) when India registered a negative growth of -5.8%.
• In comparison, FY22 saw a growth of 9.7%, FY23 saw 7%, and FY24 witnessed 8.2% growth.

Food Inflation

• Food inflation is expected to soften by the fourth quarter of FY25, mainly due to the seasonal easing of vegetable prices and the arrival of the Kharif harvest.

Geopolitical and Global Risks

• Geopolitical tensions and trade uncertainties are identified as headwinds to economic growth.
• Strategic and prudent policy management will be essential for navigating these global challenges while reinforcing domestic economic stability.

Need for Structural Reforms

• The survey calls for grassroots-level structural reforms and de-regulation to improve India’s global competitiveness in the long run.
• These reforms will help India remain a competitive player on the world stage, boosting investment and economic resilience.

Inflation Risks and Commodity Prices

• Inflation risk from rising commodity prices seems limited in FY26, but geopolitical tensions could still pose a risk to the economy.
• The government will need to monitor global economic factors and adjust policies accordingly to safeguard economic growth.

AI Governance Concerns

• The lack of an appropriate governance framework for AI may lead to the misuse or abuse of the technology.
• The survey highlights the importance of creating frameworks to regulate AI technologies to prevent potential negative impacts on the economy and society.

Corporate Bond Market

• The corporate bond market needs reforms to boost liquidity, addressing issues like entry costs, information asymmetry, and the absence of a secondary market.
• These changes will ensure a more dynamic and accessible market for corporate financing.

Rupee Depreciation in 2024

• The rupee depreciation in 2024 was mainly driven by a strong US dollar, compounded by geopolitical tensions and uncertainty around the US elections.
• This could affect India's imports and exports, impacting domestic inflation and growth prospects.

Market Correction in 2025

• A potential market correction in 2025 could have a cascading effect on India’s economy, especially considering the growing retail investor participation in the markets.
• The economic impact of such a correction could be more pronounced with increased retail investor activity.

Overall Economic Outlook

• The Economic Survey projects a balanced economic outlook for India in FY26, with a cautious but optimistic view, acknowledging both positive domestic fundamentals and global risks.
• It urges for continued strategic reforms and management to ensure stable growth amidst evolving challenges.