What the Economic Survey says: key takeaways from the govt’s report on India’s economy

The Survey has flagged two main concerns.

Introducing the Economic Survey, CEA V Anantha Nageswaran said that the broader global economic environment has become unfavourable and challenging, and global trade and investment have “come to a crawl”.

“Global trade dynamics have changed significantly in recent years, shifting from globalisation to rising trade protectionism, accompanied by increased uncertainty,” the Survey says.

The impact of this shift in global structural forces is reflected in global trade growth, and “signs of secular stagnation in the global economy are beginning to emerge”.

The second big challenge concerns the dominance of China as the world’s manufacturing superpower – a third of all global production happens in China, and it alone manufactures more global output than the next 10 countries put together.

However, thanks to global economic fragmentation and upheaval, “the world’s modus operandi of outsourcing manufacturing to China pursued vigorously in the globalisation era is poised for a reset,” says the Survey.

State of Indian economy

The Survey contends that the domestic economy remains steady amidst global uncertainties.

REAL GDP: Real Gross Domestic Product, which maps economic activity from the demand side of the economy, in the current financial year (FY25) is pegged at 6.4%; in the coming year (FY26), the Survey expects it to lie between 6.3% and 6.8%.

The share of private final consumption expenditure — the money Indians spend in their individual capacity (the consumer demand) — in India’s GDP (at current prices) is estimated to increase from 60.3% in FY24 to 61.8% in FY25. “This share is the highest since FY03,” says the Survey.

GVA: On the supply side, which is mapped by Gross Value Added (GVA), India’s growth remains close to the decadal average (Chart). Aggregate GVA surpassed its pre-pandemic trend in the first quarter of FY25, and it now hovers above the trend, the Survey points out.

INFLATION: “Headline inflation”, the CEA said, “is moderating because of moderating core inflation”. Core inflation refers to inflation in goods and services except food and fuel.

However, food inflation increased from 7.5% in FY24 to 8.4% in the current financial year, “driven by factors such as supply chain disruptions and vagaries in weather conditions”.

Antony Cyriac, one of the additional economic advisors present at the CEA’s press conference on Friday, agreed that “food inflation is 8%”, but argued that “if we remove these 4-5 items (such as vegetables and pulses), it becomes close to the target (of 4%).”

EMPLOYMENT: The Survey says “India’s labour market growth in recent years has been supported by post-pandemic recovery and increased formalisation.” It quotes the 2023-24 annual Periodic Labour Force Survey (PLFS) report that shows that all key employment related metrics such as unemployment rate, labour force participation rate and the worker-to-population ratio (WPR) have improved.

Survey’s recommendations

Among the CEA’s several recommendations, the most important is the need to deregulate the Indian economy in a way that unleashes economic growth.

Asked what his recommendation to the government was to boost consumer demand, the CEA said: “The recommendation…[to] not just…the Union government but to all governments around the country is actually a step to boost employment, income generation, and therefore consumption. The recommendation for deregulation is exactly towards that… By simplifying regulations and by looking at the nuts and bolts of regulation that affect small businesses we are lowering the cost of doing business for them, therefore opening up the space for them to hire more, which will lead to income growth and therefore higher consumption.”

Referring to the Business Reform Action Plan (BRAP) formulated by the Department for Promotion of Industry and Internal Trade (DPIIT), the Survey states that there is a positive correspondence between business reforms and the level of industrial activity, suggesting the need for deregulation and enterprise-friendly reforms in aspiring and emerging states.

Change in Survey mood

While the Survey sounds sanguine about India’s post-pandemic economic recovery, on the whole, it sounds an alert. “India faces limitations in producing critical goods at the scale and quality required to serve the infrastructure and investment needs of an aspiring economy,” says the preface of the Survey.

‘“Getting out of the way” and allowing businesses to focus on their core mission is a significant contribution that governments around the country can make to foster innovation and enhance competitiveness,” the CEA has said. For, “business as usual carries a high risk of economic growth stagnation, if not economic stagnation.”

These words contrast starkly with the optimism this same CEA exuded in the Economic Survey in 2023: “2014-2022 is an important period in the economic history of India. The economy underwent a gamut of wide-ranging structural and governance reforms that strengthened the economy’s fundamentals by enhancing its overall efficiency… This situation is analogous to the period 1998-2002 when transformative reforms undertaken by the government had lagged growth returns due to temporary shocks in the economy. Once these shocks faded, the structural reforms paid growth dividends from 2003.

“Similarly, in the present decade, the presence of strong medium-term growth magnets gives us optimism and hope that once these global shocks of the pandemic and the spike in commodity prices in 2022 fade away, the Indian economy is well placed to grow faster in the coming decade.”