India remains one of the world’s fastest-growing major economies, standing out amidst global economic uncertainty. As 2024 concludes, the nation is navigating a mixed economic scenario marked by both resilience and challenges. While GDP growth remains strong relative to many global economies, issues such as inflation, uneven sectoral contributions, and employment mismatches highlight areas needing attention. This article presents a comprehensive review of India’s economic performance in 2024 and what lies ahead in 2025, balancing opportunities with risks.
2024: Achievements and Areas of Concern
Economic Growth
- Achievements: India recorded GDP growth of 6.0% in the first half of FY 2024-25, reflecting resilience despite global challenges. Sectors like construction (9.1%) and public administration were key contributors.
- Concerns: Growth slowed compared to the 8.2% seen in H1 2023-24, driven by weaker performance in manufacturing and services. Global economic headwinds and domestic bottlenecks have further constrained industrial growth.
Foreign Direct Investment (FDI)
- Achievements: Key sectors attracting FDI included:
- Technology and IT Services: 25%
- Renewable Energy: 20%
- Pharmaceuticals and Healthcare: 18%
- Real Estate and Infrastructure: 12% The government’s Production-Linked Incentive (PLI) schemes continued to drive investments in critical sectors.
- Concerns: Net FDI inflows declined as profit repatriation increased. Manufacturing, a critical sector for job creation, remained underinvested, raising questions about long-term labor market stability.
Inflation and Consumption
- Achievements: Private consumption grew by 6.7% in H1 2024-25, reflecting urban resilience. General inflation, at 6.21% in October 2024, remained within manageable limits, aided by monetary interventions.
- Concerns: Food inflation surged to 10.87%, making essentials like cereals, vegetables, and pulses costlier. Rural consumption stagnated, largely due to low agricultural productivity and limited rural income growth.
Exports
- Achievements: Services exports, especially IT and financial services, grew by 5.2%, supporting the balance of payments.
- Concerns: Merchandise exports contracted by 4.7%, hindered by slowing global trade and over-reliance on a few markets and products. Supply chain inefficiencies also remain a hurdle.
Employment
- Achievements: The national unemployment rate remained steady at 3.2%, with rural labor absorption showing resilience.
- Concerns: Urban female unemployment remained disproportionately high at 7.1%. Manufacturing’s failure to generate adequate jobs contributed to the overall labor market mismatch.
Public Investment in Education and Health
- Achievements: Incremental increases in spending on education and health have begun to show improvements in access, particularly through initiatives like Ayushman Bharat.
- Concerns: Expenditure remains below desired levels, limiting the potential for human capital enhancement. Gaps in primary healthcare and skill development persist.
2025: Expectations and Risks
Growth Outlook
- Positive Trends: Economic growth is projected to recover to 6.5%-6.8% in 2025, driven by infrastructure investments, improved global demand, and government initiatives such as the PLI schemes.
- Risks: A slowing global economy, geopolitical tensions, and volatile commodity prices could limit growth. Domestically, structural issues in manufacturing and agriculture could hinder recovery.
FDI and Investment Prospects
- Positive Trends: India’s share of global FDI is expected to rise in 2025. High-growth sectors like semiconductors, renewable energy, and advanced manufacturing are likely to attract more inflows.
- Risks: Persistent regulatory hurdles and challenges in land acquisition could deter new investments. Uneven FDI distribution across regions and sectors may exacerbate inequalities.
Sectoral Trends
- Positive Trends:
- Agriculture: Mechanization and investment in rural infrastructure could improve productivity.
- Manufacturing: Global recovery and government support could revive the sector.
- Services: Continued digitization and automation will drive growth in IT and financial services.
- Risks: Agriculture remains vulnerable to climate variability, while structural inefficiencies in manufacturing could delay its turnaround.
Employment
- Positive Trends: Urban job creation in high-value services and rural diversification through micro-enterprises are likely to improve labor market outcomes.
- Risks: Informal employment remains dominant in rural areas, and the slow pace of formalization is a persistent concern. Gender disparities in urban employment are likely to continue without targeted interventions.
Inflation Management
- Positive Trends: Inflation is expected to moderate to 5.5%-6%, provided agricultural productivity improves and supply chains stabilize.
- Risks: Volatility in global commodity markets and weather disruptions could lead to food price spikes, undermining inflation control efforts.
Public Spending
- Positive Trends: Increased allocations to education, health, and infrastructure could boost long-term productivity and inclusivity.
- Risks: Fiscal consolidation pressures might limit the government’s ability to expand developmental spending, especially if revenue growth slows.
Growing Inequality in India in 2024
1. Economic Recovery and K-shaped Growth:
While India’s economy has shown resilience post-pandemic, the recovery has been uneven. The wealthy have benefited from sectors like technology, finance, and stock market gains, while informal workers and rural populations have struggled due to job losses, stagnant wages, and inflation.
2. Inflation and Rising Costs of Living:
In 2024, inflation impacted lower-income groups disproportionately. Essential goods and services, particularly food and healthcare, became more expensive, straining household budgets for the poor while wealthier segments managed to absorb these costs.
3. Education Gap Widening:
Access to quality education remains unequal. With digital education becoming mainstream, rural and underprivileged areas faced infrastructure and connectivity issues, limiting opportunities for children from low-income families.
4. Healthcare Disparities:
The healthcare system saw continued disparities, with affluent groups accessing private healthcare while the poor relied on overburdened public systems, especially in rural areas. Chronic underfunding in public healthcare exacerbated these divides.
5. Wealth Concentration:
India witnessed further concentration of wealth among top corporations and high-net-worth individuals, with reports indicating that the richest 1% controlled a significant portion of the country’s wealth. Tax policies were seen as favoring the affluent.
Expectations for 2025
1. Policy Interventions:
The government may roll out welfare schemes focusing on reducing rural distress and job creation. However, much will depend on the allocation and efficiency of these programs. Initiatives targeting digital inclusion and rural development could gain traction.
2. Global Economic Challenges:
Global uncertainties, such as geopolitical tensions and climate change, may continue to impact growth, disproportionately affecting low-income and vulnerable groups due to job losses and rising costs.
3. Employment Focus:
The upcoming year is likely to emphasize skill development and manufacturing to generate employment. However, automation and lack of proper training could limit opportunities for unskilled workers, sustaining the inequality gap.
4. Urban-Rural Divide:
Urban areas are likely to grow wealthier with ongoing infrastructure and industrialization projects, but rural areas may lag unless targeted development programs bridge this divide.
5. Social Movements and Awareness:
There is an increasing public discourse on inequality, and grassroots movements demanding equitable policies could gain momentum. Youth involvement in advocating for better education and healthcare access may pressurize policymakers.
6. Digital Inclusion Efforts:
Efforts to improve digital literacy and infrastructure may help bridge the gap, particularly if the government and private sectors collaborate effectively in rural India.
India’s trajectory in 2025 will heavily depend on political will, economic policies, and global conditions. While progress is possible, addressing deep-rooted structural inequalities will require sustained and inclusive efforts.
Strategic Focus for 2025
To balance growth and address vulnerabilities, policymakers should prioritize:
- Diversifying FDI and Exports: Expand PLI schemes to high-tech sectors like AI, semiconductors, and green technologies. Focus on new trade agreements and diversified export markets.
- Strengthening Agriculture: Improve rural infrastructure, stabilize input costs, and invest in mechanization to enhance productivity and reduce food price volatility.
- Promoting Employment Inclusivity: Foster labor-intensive manufacturing, formalize rural employment, and address gender disparities in urban job markets.
- Boosting Consumption and Investment: Support rural demand recovery and incentivize private investments in healthcare, education, and renewable energy.
- Enhancing Regional Equity: Ensure balanced FDI inflows and development spending across states to reduce regional disparities.
Conclusion: A Balanced Outlook for 2025
India’s economic story is one of resilience and opportunities but tempered by pressing challenges. While 2025 holds the promise of robust growth, sustained FDI inflows, and structural reforms, addressing inflation, employment mismatches, and sectoral imbalances will be crucial. A balanced approach to growth and equity will not only solidify India’s position as a global economic leader but also create a more inclusive and sustainable future for its people.
Indian Political Debate 