In a recent parliamentary presentation, Finance Minister Nirmala Sitharaman introduced the Economic Survey, which projects India’s GDP growth rate for the 2024-25 fiscal year to be between 6.5% and 7%. This optimistic forecast highlights the economy’s robust position despite global uncertainties.
The survey notes that the global economic growth rate is expected to be 3.2% in 2023, according to the April World Economic Outlook. Variations in growth rates among countries are attributed to domestic structural challenges, differing levels of exposure to geopolitical conflicts, and the effects of tighter monetary policies.
India has managed to sustain the growth momentum achieved in FY23 into FY24, with its real GDP increasing by 8.2% for the fiscal year. This growth exceeded 8% in three of the four quarters of FY24, reflecting the economy’s resilience despite external pressures. The government’s emphasis on maintaining macroeconomic stability has minimized the adverse effects of global challenges.
The government’s focus on capital expenditure and sustained private investment has led to a 9% increase in Gross Fixed Capital Formation in real terms for 2023-24. The survey anticipates that improvements in corporate and bank balance sheets will further bolster private investment. Additionally, positive trends in the residential real estate sector suggest significant increases in household sector capital formation.
Inflation, which had been influenced by global issues, supply chain disruptions, and unpredictable monsoons, has been effectively managed through both administrative and monetary policy measures. Retail inflation, which averaged 6.7% in FY23, decreased to 5.4% in FY24.
Despite an expansionary public investment approach, the general government’s fiscal balances have improved. Enhanced tax compliance, driven by procedural reforms and increased digitization, has played a key role in achieving this balance. The external balance faced pressures from weak global demand for goods, but strong services exports have largely offset this. Consequently, the Current Account Deficit (CAD) reduced to 0.7% of GDP in FY24, compared to a 2.0% deficit in FY23.
