As the nation awaits the Union Budget 2025, the Economic Survey 2024-25 sets the stage by outlining India’s economic performance, challenges, and opportunities. The report presents a comprehensive assessment of key macroeconomic indicators, the financial sector, global trade dynamics, and crucial policy reforms. The document highlights India’s economic resilience, the importance of deregulation, and the pressing need for investment-driven growth.
Before we analyze the implications, let us first outline the key highlights of the Economic Survey 2024-25:
Key Highlights from the Economic Survey 2024-25
- Economic Growth & Stability – Despite global uncertainties, India’s economy remains stable and resilient, with a strong domestic growth engine compensating for slowing global trade.
- Monetary and Financial Sector – The financial sector is in good health, with declining NPAs, strong credit growth, and sound banking indicators, though concerns remain about leveraged loans and market volatility.
- External Trade & FDI Trends – India faces challenges from restrictive global trade policies like the EU’s Carbon Border Adjustment Mechanism (CBAM), while net FDI inflows have declined despite strong gross inflows.
- Inflation & Price Stability – While headline inflation has moderated, food price volatility remains a concern, driven by extreme weather and supply-chain disruptions.
- Infrastructure & Investment Push – The focus remains on large-scale infrastructure investments, with significant government spending on transport, power, and digital infrastructure.
- Agriculture & Food Security – Emphasis is placed on crop diversification, mechanization, and climate resilience, with an urgent need for more efficient resource utilization.
- Employment, Skill Development & AI’s Impact – Job creation, upskilling, and AI-driven transformations are central themes, with the report viewing AI as an opportunity rather than a threat.
- Social Sector & Human Capital – Education, healthcare, and mental health reforms take center stage, alongside efforts to improve women’s workforce participation.
- Climate & Energy Transition – Balancing energy security with sustainability remains a challenge, particularly as India remains dependent on China for solar energy components.
- Deregulation & Governance Reforms – Reducing bureaucratic hurdles and improving regulatory efficiency are crucial for boosting investment and economic dynamism.
Now, let’s analyze these aspects within the current economic context, weighing both their strengths and potential challenges.
Analysis of Key Economic Survey Highlights
India’s economic growth has indeed demonstrated resilience, but this must be examined in the broader context of global headwinds and domestic constraints. While the survey highlights steady growth, it does not ignore the geopolitical tensions, global slowdown, and trade restrictions that could dampen India’s external sector. The global economy has been volatile, with Europe’s economic stagnation, China’s deflationary struggles, and fluctuating commodity prices adding uncertainty to India’s external trade prospects. While India has maintained a steady growth trajectory, it must now pivot towards domestic economic levers such as investment in infrastructure, technology, and skill development to sustain this momentum.
The financial sector’s strong performance is a bright spot, particularly with low NPAs and improved credit growth, suggesting a healthy banking ecosystem. However, the rise in leveraged loans and market volatility presents a potential risk of financial instability. The stock markets are at elevated levels, and while this signals investor confidence, it also raises concerns about a possible asset bubble. In the banking sector, strong capital buffers provide resilience, but rapid credit expansion without corresponding economic output could create medium-term challenges. Financial regulators must strike a delicate balance between growth and financial prudence to avoid excessive speculation and debt accumulation.
On the external trade front, India’s declining net FDI is a concern. While gross inflows remain healthy, higher repatriation by foreign investors suggests concerns over policy consistency and long-term profitability. Additionally, restrictive global trade policies, such as the EU’s CBAM, threaten India’s export competitiveness, particularly in high-carbon sectors like steel and manufacturing. India must navigate these challenges by diversifying export markets and enhancing domestic manufacturing competitiveness. The “China challenge” is particularly pertinent, with India’s heavy reliance on Chinese imports for critical sectors like solar energy and electronics creating strategic vulnerabilities.
Inflation control has been a success story in recent months, with headline inflation moderating, but food price volatility remains a structural issue. Extreme weather events, fluctuating fuel prices, and supply-chain disruptions have made essential commodities like onions and tomatoes highly unpredictable in price movements. The government must focus on long-term agricultural reforms, including better cold storage infrastructure, efficient irrigation systems, and more robust price stabilization mechanisms to protect both producers and consumers.
Infrastructure investment remains a cornerstone of India’s growth strategy, with capital expenditure driving improvements in transport, energy, and urban development. The PLI scheme has successfully boosted domestic manufacturing, particularly in consumer electronics and air-conditioners. However, while public investment is crucial, it is also important to ensure that private sector participation is not crowded out. With fiscal constraints tightening, the government must strike a balance between continuing capital expenditure and maintaining fiscal discipline.
Agriculture remains a double-edged sword—while crop diversification and mechanization are positive steps, challenges such as water scarcity, farmer debt, and inadequate market access persist. Climate resilience is a major focus, yet agricultural productivity must be improved through technological advancements and better credit access. Ensuring that small and marginal farmers benefit from policy interventions is essential for inclusive growth.
On employment and skill development, the Economic Survey recognizes AI’s potential to transform jobs rather than eliminate them. However, job creation is not keeping pace with labor force expansion, particularly in the manufacturing and services sectors. The gig economy is growing, but lack of formal labor protections for gig workers remains an issue. India’s skilling programs need better implementation, particularly in emerging fields like AI, robotics, and green energy.
Social sector reforms receive due attention in the survey, with a renewed emphasis on education, healthcare, and mental health. The Ayushman Bharat expansion is a welcome move, but rural healthcare infrastructure remains weak. Additionally, women’s workforce participation is still low, and while the government has initiated steps to address this, structural and cultural barriers remain.
Energy security and climate policy present another challenge. While India has scaled up renewable energy investments, it remains highly dependent on Chinese supply chains for solar panels and battery storage technology. The government must accelerate domestic production of critical components while ensuring that energy transition policies do not compromise economic competitiveness.
Finally, deregulation and governance reforms are rightly emphasized as key growth enablers. Reducing bureaucratic red tape, streamlining compliance, and ensuring policy consistency will encourage entrepreneurship and private investment. However, some sectors, such as finance and healthcare, require stronger oversight rather than deregulation to maintain stability and public trust.
What This Means for the Budget 2025
Given the Economic Survey’s emphasis on deregulation, investment, and resilience, we can anticipate several key themes in tomorrow’s Budget. The government is likely to continue capex-driven growth, with a strong focus on infrastructure, rural development, and digital transformation. There could be targeted measures to stabilize food inflation, along with incentives for agriculture and climate resilience programs. The Budget may also introduce new policies to boost MSMEs, promote domestic manufacturing, and enhance skilling programs.
On taxation, while the government will aim to maintain fiscal prudence, there may be targeted tax benefits for industries aligned with Make in India and Digital India initiatives. Social sector spending is expected to rise, with increased allocations for education, healthcare, and labor market reforms. Additionally, we may see incentives for AI and technology investments, given their growing role in employment and productivity.
As India moves forward, Budget 2025 must strike a balance between economic ambition and fiscal discipline. The choices made tomorrow will determine whether India’s growth story remains one of resilience—or one of cautionary missed opportunities.
Indian Political Debate 