India’s domestic economy remains steady amidst global uncertainties, driven by robust growth in the services sector, a rebound in agriculture, and the industrial sector gaining momentum due to rising private consumption, according to the Economic Survey tabled in Parliament on Friday.
The National Statistical Office’s first advance estimates project real gross domestic product (GDP) growth for FY25 at 6.4%. From the demand side, private final consumption expenditure at constant prices is expected to grow by 7.3%, fueled by a rebound in rural demand. Private consumption as a share of GDP (at current prices) is set to increase from 60.3% in FY24 to 61.8% in FY25, the highest since FY03. Gross fixed capital formation, reflecting investment in the economy, is estimated to grow by 6.4%.
On the supply side, real gross value added (GVA) is also projected to grow by 6.4%. The agriculture sector is anticipated to rebound with a growth of 3.8% in FY25, while the industrial sector is estimated to expand by 6.2%. Strong growth rates in construction activities and utility services, including electricity, gas, and water supply, are expected to support industrial expansion. The services sector is forecasted to maintain robust growth at 7.2%, driven by healthy activity in financial, real estate, professional services, public administration, defense, and other services.
The agriculture sector remains strong, consistently performing above trend levels. The industrial sector has also regained its footing above the pre-pandemic trajectory. The recent robust growth rates have positioned the services sector close to its trend levels.
The Survey highlights that geopolitical risks remain elevated due to ongoing conflicts, posing significant risks to the global economic outlook. Strengthening domestic growth levers is crucial in this context. These global risks can influence growth, inflation, financial markets, and supply chains. An intensification of conflicts in the Middle East or the Russia-Ukraine conflict could lead to market repricing of sovereign risk in affected regions and disrupt global energy markets. Although the oil market is well-supplied for now, any damage to energy infrastructure could tighten supply, adding uncertainty to the global economic outlook.
Tensions in the Middle East have disrupted trade through the critical Suez Canal route, accounting for 15% of global trade. In response, several shipping companies have diverted their ships around the Cape of Good Hope, increasing delivery times by 10 days or more on average. These disruptions have led to higher freight rates along major shipping routes, impacting global trade activity.
India’s economic outlook for FY25 remains optimistic, with a focus on strengthening domestic growth amidst global uncertainties. The government’s proactive measures and robust economic sectors are expected to drive sustained growth in the coming year.
