India’s economy remains steady amidst global uncertainties: Economic Survey

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 picking up momentum on the back of rising private consumption, according to the Economic Survey tabled in Parliament on Friday.

As per the first advance estimates released by the National Statistical Office, the real gross domestic product (GDP) growth for FY25 is estimated to be 6.4 per cent, the Survey points out.

The survey highlights that from the angle of aggregate demand in the economy, private final consumption expenditure at constant prices is estimated to grow by 7.3 per cent, driven by a rebound in rural demand. Private consumption as a share of GDP (at current prices) is estimated to increase from 60.3 per cent in FY24 to 61.8 per cent in FY25. This share is the highest since FY03. Gross fixed capital formation (at constant prices) which reflects the investment taking place in the economy is estimated to grow by 6.4 per cent.

On the supply side, real gross value added (GVA) is also estimated to grow by 6.4 per cent. The agriculture sector is expected to rebound to a growth of 3.8 per cent in FY25. The industrial sector is estimated to grow by 6.2 per cent in FY25, the survey states.

Strong growth rates in construction activities and electricity, gas, water supply and other utility services are expected to support industrial expansion. Growth in the services sector is expected to remain robust at 7.2 per cent, driven by healthy activity in financial, real estate, professional services, public administration, defence, and other services, according to the survey.

The agriculture sector remains strong, consistently operating well above trend levels. The industrial sector has also found its footing above the pre-pandemic trajectory. The robust rate of growth in recent years has taken the services sector close to its trend levels, it adds.

The survey highlights that geopolitical risks remain elevated due to ongoing conflicts, which pose significant risks to the global economic outlook. In this context, it has underlined the importance of strengthening the levers of domestic growth.

These global risks can influence growth, inflation, financial markets, and supply chains. An intensification of the evolving conflicts in the Middle East or the Russia-Ukraine conflict, could lead to market repricing of sovereign risk in the affected regions and disrupt global energy markets. The oil market is well-supplied for now. However, any damage to energy infrastructure could tighten supply, adding uncertainty to the global economic outlook, the survey states.

Tensions in the Middle East have disrupted trade through the critical Suez Canal route that accounts for 15 per cent of global trade. In response, several shipping companies have diverted their ships around the Cape of Good Hope, which has increased delivery times by 10 days or more, on average. These disruptions have led to higher freight rates along major shipping routes, which in turn impact global trade activity, the survey added.