Economic Survey 2025 Highlights: Inflation risk seems limited to FY26; geopolitical tensions may cause vulnerability, says survey

Arguing that there was no economic rationale to shut down coal-based power plants, the Economic Survey on Friday said it was imperative for India to first try and become a developed country by 2047, and then pursue the ambition of achieving net-zero status by 2070.

This carries forward the point made in last year’s Economic Survey, that had asserted that it was “morally wrong” to tell developing countries to abandon their aspirations for better living in order to achieve climate targets, when the developed world was not doing even the bare minimum expected from it. Read More

The lack of funding from developed countries to mitigate climate change in the Global South may prompt developing countries to "rework" their climate targets, India said on Friday.

In the Economic Survey 2024-25 tabled in Parliament, the government said the new financial package agreed at the 2024 UN climate conference (COP29) in Azerbaijan to support climate action in the developing world "presents little optimism".

With countries required to submit their next round of Nationally Determined Contributions or climate plans for the 2031-2035 period this year, the economic survey said the "funding shortfall may lead to a reworking of the climate targets".

According to the Paris Agreement signed in 2015, countries are encouraged to strengthen their climate targets every five years.

India's Chief Economic Advisor V Anantha Nageswaran said domestic resources will be the key to climate action amid the lack of support from developed countries.

Therefore, resources for meeting development challenges may be affected, undermining progress toward sustainable development objectives and "compromising the integrity of international climate partnerships", he said. PTI

The Economic Survey presented in Parliament rightly focuses on artificial intelligence, innovation and higher infrastructure expenditure with a pitch for private sector participation, according to experts.

The key pre-budget document was tabled in both the Houses of Parliament by Finance Minister Nirmala Sitharaman.

According to the 436-page document, India's economy is likely to expand by 6.3-6.8 per cent in the coming fiscal, much lower than what is needed to become a developed country, and requires deregulation and reforms in areas like land and labour to stimulate growth.

Madan Sabnavis, Chief Economist at Bank of Baroda, said it has projected growth of 6.3-6.8 per cent for 2025-26, which will be considered by the Budget tomorrow.

"It does highlight the uncertainty in the global economic order and recommends further reforms, especially in terms of ease of doing business to take the economy ahead. It is positive of consumption and investment picking up in the second half of FY25, which should stabilise further in FY26," Sabnavis said.

Ranen Banerjee, Partner and Leader Economic Advisory, PwC India, said the document summarises the challenges facing the Indian economy, with more headwinds than tailwinds listed.

"It may be challenging to achieve the projected growth rate of 6.3–6.8 per cent, given that growth in the fast lane is predicated on difficult deregulation and reforms at the grass-roots level," he said. PTI

Global roles within Global Capability Centres (GCCs) established in India are expected to grow over four-fold to 30,000 by 2030, the Economic Survey 2024-25 said on Friday.

According to experts, the view of the companies across the globe for India is changing from being a low-cost destination to centre for innovation and highly skilled talents that is leading to more global roles coming to the country.

The survey said India has established itself as a prominent player in leveraging its vast talent pool, which accounts for 28 per cent of the global (science, technology, engineering, mathematics) STEM workforce and 23 per cent of the global software engineering talent.

"Over the past decade, the GCC ecosystem in India has matured significantly, advancing into high-end engineering roles such as product managers and architects, with 35 per cent of transformation hubs exhibiting a strong presence of architects. PTI

Arguing that India’s workforce in low-skill and low-value-added services remains vulnerable to artificial intelligence (AI), the Economic Survey 2024-25 called for the creation of “robust institutions,” which could help transition workers to medium- and high-skilled jobs, where AI can augment their efforts rather than replace them.

“Although the impact of AI on labour will be felt across the world, the problem is magnified for India, given its size and its relatively low per capita income,” the Survey said.

The Survey proposed the concept of “stewarding institutions,” which would be “agile, crosscutting across sectors and up to date on the latest developments, so that they are equipped to identify both opportunities and threats. Stewarding institutions will have to be responsible for designing an approach that delicately balances public welfare without stifling innovation”.

The Economic Survey 2024-25 has warned that excessive financialisation can harm the economy, with potentially severe consequences for a low-middle-income country like India.

While acknowledging the increasing reliance on financial markets for funding, the Survey emphasised that financial markets must complement the banking sector to bridge the capital requirement gap.

“Financial markets must grow in tandem with the economy’s capital needs and overall economic growth, rather than outpacing them,” it cautioned.

The Survey warned that “over-finance” can lead to the financial sector competing with the real sector for resources, including skilled labour. This can result in the real economy being deprived of essential resources.

The failure of the developed countries to commit adequate amounts of climate finance at last year’s climate conference in Baku might force India to temper the ambition of its climate targets for 2035, the government said Friday.

Expressing disappointment with the outcome of discussions over climate finance in Baku, the Economic Survey for 2024-25, tabled in Parliament on Friday, said the promise of just $300 billion in climate finance flows, instead of the projected requirement of more than $1 trillion a year, severely undermined the objectives of the Paris Agreement.

“It (the $300 billion promised climate finance every year) is out of sync with the needs of the critical decade when action is required to keep the temperature goals of the Paris Agreement within reach. The decision (in Baku) demonstrates a significant misalignment with the Paris Agreement’s mandate to demonstrate a ‘progression beyond previous efforts’ by developed countries,” the Economic Survey said.

The Economic Survey 2024-25 batted for greater deregulation for fostering innovation and enhancing competitiveness, stating that “getting out of the way” and allowing businesses to “focus on their core mission”, and “wiping out the trust deficit” are critical efforts that governments around the country should undertake.

It called for the focus of reforms and economic policy to now be on systematic deregulation.

Recommending rolling back regulations “significantly”, stopping micromanagement of economic activity, and embracing risk-based regulations, the Survey called for states to take the lead in Ease of Doing Business (EoDB) 2.0.

It also underscored that deregulation is more essential for growth of micro, small, and medium enterprises (MSMEs) vis-à-vis large companies.

The Indian Railways achieved a growth of 8 per cent in passenger traffic and 5.2 per cent in freight revenue in FY24, according to the Economic Survey 2024-25 that was tabled in Parliament on Friday.

"Indian Railways (IR) is the fourth largest network in the world. Passenger traffic originating in IR achieved a growth of 8 per cent over the previous year. Revenue earning freight in FY24 achieved a growth of 5.2 per cent," the survey said, adding that in view of the rising passenger traffic, the government is taking various steps to upgrade passenger amenities.

The survey highlighted the government's focus on digitalisation in the Indian Railways and said, "E-ticketing has touched 86 per cent in the reserved sector as of October 2024.

Ticketing through digital means in the unreserved sector has increased from 28 per cent at the beginning of the current financial year to around 33 per cent in October 2024."

"IR has also transformed the refund process, enabling refunds in eligible cases within 24 hours in around 98 per cent of cases. Dynamic QR code-based payment has been enabled across all the counters. The passenger reservation system is being redeveloped using cloud-native technologies," the survey said.

-PTI

The Economic Survey on Friday called for a new strategic trade roadmap for India, along with measures to cut trade costs and enhance export competitiveness amid growing protectionism globally.

It said that much remains to be done to enhance trade competitiveness. "Global trade dynamics have changed significantly in recent years, shifting from globalisation to rising trade protectionism, accompanied by increased uncertainty. This calls for a new strategic trade roadmap for India," said the Economic Survey 2024-25 which was tabled in the Parliament by Finance Minister Nirmala Sitharaman.

The Survey added that to remain competitive and enhance its participation in global supply chains, India must continue reducing trade costs and improving facilitation to boost export competitiveness.

ChatGPT creator OpenAI may have incurred a cost upwards of $30 million – or 172 times $200,000 to be precise – for running its latest 03 model’s high-compute configuration on the ARC-AGI benchmark, showcasing the astronomical costs involved in not just building a high-end artificial intelligence (AI) models, but benchmarking them for general reasoning.

This cost was mentioned in the Economic Survey 2024-25 released Friday.

O3 is OpenAI’s latest reasoning model, which the firm had announced last December.

“…developing more sophisticated models comes with significant costs as well. Since processing user queries utilises vast computational resources, AI firms incur running costs for the model. For instance, in the case of OpenAI’s o3 model…the breakthrough in processing capability came at a very high cost. In running the ARC-AGI benchmark, which is considered one of the most challenging tasks for an AI to undertake, OpenAI incurred a cost of USD 200,000 for its low-efficiency model,” the Survey said.

Arguing that India’s workforce in low-skill and low-value-added services remains vulnerable to artificial intelligence (AI), the Economic Survey 2024-25 called for the creation of “robust institutions,” which could help transition workers to medium- and high-skilled jobs, where AI can augment their efforts rather than replace them.

“Although the impact of AI on labour will be felt across the world, the problem is magnified for India, given its size and its relatively low per capita income,” the Survey said.

The Survey proposed the concept of “stewarding institutions,” which would be “agile, crosscutting across sectors and up to date on the latest developments, so that they are equipped to identify both opportunities and threats. Stewarding institutions will have to be responsible for designing an approach that delicately balances public welfare without stifling innovation”.

Read the full report here

Adoption of artificial intelligence in the Indian healthcare sector faces several challenges, including lack of specialised talent, data complexities, and difficulties in scaling up, and requires attention going forward, the Economic Survey 2024-25 tabled in Parliament flagged on Friday.

The National Strategy for Artificial Intelligence (2018) developed by NITI Aayog discussed how AI could help address the challenges of quality, accessibility, and affordability for a large section of the population.

The strategy emphasised how AI combined with robotics and the Internet of Medical Things (IoMT) can potentially become the 'new nervous system for healthcare', providing solutions to address healthcare problems and helping the government achieve universal health for all, the report stated.

According to NASSCOM, the widespread adoption of AI in healthcare can create new opportunities for the sector and bridge the accessibility, affordability, and quality gaps.

-PTI

The Ayushman Bharat health insurance scheme has played a decisive role in the significant reductions observed in out-of-pocket expenditure through an increase in social security and primary health expenditure, with more than Rs 1.25 lakh crore in savings recorded, according to the Economic Survey 2024-25 that was tabled in Parliament on Friday.

The Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) has revolutionised healthcare by providing a health coverage to the bottom 40 per cent of India's most vulnerable populations, the survey said.

It covers more than 12 crore families or, approximately, 55 crore individuals and is the world's largest health-insurance scheme, offering annual hospitalisation benefits of up to Rs 5 lakh per family for secondary and tertiary care.

Launched to address health inequities, the AB-PMJAY prioritises the poorest segments of the population based on the Socio-Economic Caste Census 2011, adopting a holistic and need-based approach, the report said.

-PTI

Healthy corporate earnings, stable macro fundamentals and online digital investment platforms have encouraged greater investors' participation in the capital markets with the number of unique investors rising to 11 crore, the Economic Survey said on Friday.

This increased investors' participation, coupled with robust gains generated by equities has created significant household wealth over the last few years.

As per the NSE's estimates, household wealth in Indian equities has increased by over Rs 40 lakh crore in the last five years (2020-2024; as of September 2024).

Overall, the participation of investors in the capital market has increased through direct (trading in markets through their accounts) and indirect (through mutual funds) channels.

The unique investor base at the National Stock Exchange (NSE) surpassed the 10-crore mark in August 2024, tripling in the last four years, and currently stands at 10.9 crore (as of December 26, 2024).

-PTI

Highlighting the need for enhanced deregulation for micro, small and medium enterprises, the Economic Survey 2024-25 on Friday said some challenges remain in the regulatory environment. The regulatory compliance burden holds back formalisation and labour productivity, limits employment growth, chokes innovation and depresses growth, according to the survey tabled in Parliament by Finance Minister Nirmala Sitharaman.

"The faster economic growth that India needs is only possible if the union and state governments continue to implement reforms that allow small and medium enterprises to operate efficiently and compete cost-effectively," it stated.

Without deregulation, other policy initiatives will not deliver on their desired goals, emphasised the economic survey, adding that by empowering small businesses, enhancing economic freedom, and ensuring a level playing field, governments can help create an environment where growth and innovation are not only possible but inevitable.

It further stressed that Ease of Doing Business (EoDB) 2.0 should be a state government-led initiative focusing on fixing the root causes behind the unease of doing business.

In the next phase for EoDB, it added, states must break new ground on liberalising standards and controls, setting legal safeguards for enforcement, reducing tariffs and fees, and applying risk-based regulation.

Citing examples from other countries, the survey stated, "The need to find growth avenues in an export-challenged, environment-challenged, energy-challenged, and emissions-challenged world means we need to act on deregulation with a greater sense of urgency."

-PTI

India needs to develop climate-resilient crop varieties and enhance yields to increase the production of pulses, oilseeds, tomatoes and onion to ensure long-term price stability, the Economic Survey 2024-25 on Friday said amid persisting concerns over food inflation.

The survey, tabled by Finance Minister Nirmala Sitharaman on Friday in Parliament, emphasised that India's food inflation rate has remained firm, driven by a few food items like vegetables and pulses.

The contribution of vegetables and pulses to the overall inflation stood at 32.3 per cent in 2024-25 (April to December).

When these items are excluded, the average food inflation rate for FY25 (April-December) was 4.3 per cent, which is 4.1 per cent lower than the overall food inflation, the survey said. (PTI)

To meet the goal of Viksit Bharat@2047, private investment needs to be accelerated in many critical sectors as government funding alone cannot upgrade the required infrastructure, the Economic Survey 2024-25 has stated.

The document tabled in Parliament on Friday stated that it is also clear public capital alone cannot meet the demands of upgrading the country's infrastructure commensurate with the requirements of Viksit Bharat@2047.

“We need to ensure increasing private participation in infrastructure by improving their capacity to conceptualise projects and their confidence in risk and revenue-sharing mechanisms, contract management, conflict resolution and project closure.

“The efforts of the Union Government would need to be supplemented with wholehearted acceptance of the need for public-private partnerships in infrastructure across the country. Equally important, the private sector must reciprocate, too,” the Survey, tabled by Finance Minister Nirmala Sitharaman, said. (PTI)

Investment in the infrastructure sector in India needs to be continuously scaled up over the next two decades to sustain a high rate of growth, said the Economic Survey 2024-25 tabled in Parliament on Friday.

"India needs a continued step-up of infrastructure investment over the next two decades to sustain a high rate of growth," the survey said.

In the first quarter of FY25, the constraints on new approvals and spending during the general elections, coupled with heavy monsoon in many regions, affected the progress of the infrastructure spending, said the latest survey.

India is expected to record GDP growth of 6.3-6.8 per cent in the financial year 2025-26 on the back of strong fundamentals, calibrated fiscal consolidation and stable private consumption, said the Economic Survey tabled in Parliament on Friday.

The economic growth rate is estimated to slip to 4-year low of 6.4 per cent in the current financial year.

"...the fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption. On balance of these considerations, we expect that the growth in FY26 would be between 6.3 and 6.8 per cent," the survey said. (PTI)

The Economic Survey 2024-24 highlighted the reason behind the major drop in Indian Rupee value. The Eco Survey document said that the Rupee depreciation in 2024 was mainly due to strong US dollar amid geopolitical tensions, and uncertainty around US election.

- Indian economy expected to grow at 6.3-6.8 pc in FY26

- Fundamentals of Indian economy remain robust with strong external account and stable private consumption

- Investment activity expected to pick up, supported by higher public capex and improving business expectations

- Food inflation likely to soften in Q4 FY25 with seasonal easing of vegetable prices, Kharif harvest arrivals

- India's economic prospects for FY26 balanced. Headwinds to growth include elevated geopolitical, trade uncertainties

Finance Minister Nirmala Sitharaman tabled the Economic Survey 2024-25 in the Parliament today, which projected India’s gross domestic product (GDP) to grow between 6.3 per cent and 6.8 per cent in the next fiscal year.

“The fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption. On balance of these considerations, we expect that the growth in FY26 would be between 6.3 and 6.8 per cent,” according to the Survey authored by Chief Economic Advisor V Anantha Nageswarana and his team of officials. Read more.

The Economic Survey 2024-25 states, "Construction has been a standout, gaining momentum since mid-FY21 and soaring approximately 15 per cent above its pre-pandemic trend—an impressive feat driven by robust infrastructure development and housing demand. The utilities sector, including electricity, gas, water supply, and other services, reached its pre-pandemic trend by the end of FY23 and has consistently stayed above these levels. Manufacturing, while steadily recovering, remains slightly below its pre-pandemic trajectory. Meanwhile, mining continues to operate below its pre-pandemic trend."

Lok Sabha Speaker Om Birla adjourned the House proceedings till 11 am on February 1 after FM Nirmala Sitharaman tabled the Economic Survey 2024-25.

Finance Minister Nirmala Sitharaman has tabled the Economic Survey 2024-25 in the Lok Sabha. The presentation of the Economic Survey document will take place soon in the Parliament.

After her inaugural speech to kick off the Budget session 2025, President Droupadi Murmu departed from the Parliament and is heading towards her official residence, the Rashtrapati Bhavan.

President Murmu said, "My government is taking decisions considering the present and coming generations. We are taking the country forward towards green future and green jobs. In the last six months, several big decisions have been taken to achieve the target of 500-gigawatt non-fossil fuel energy capability by 2030."

President Murmu said, "My government has taken historic steps to protect country's borders and ensure internal security."

She added, "Fight against Left Wing Extremism has reached final stage, number of affected districts has declined sharply to 38."

President Droupadi Murmu said that the situation in Jammu and Kashmir has changed drastically after the abrogation of Article 370.

She also said that the government worked towards ending the feeling of alienation among the northeastern states. President Murmu said, "First Ashtalakshmi Mahotsav was organised to enable entire country to see potential of eight states of northeast."