Economic Survey 2023-2024 projects India’s real GDP growth at 6.5-7% for FY25, aligning with IMF estimates

India's real GDP is anticipated to grow between 6.5% and 7% in fiscal year 2024-25, according to the Economic Survey presented in Parliament by finance minister Nirmala Sitharaman on 22 July.

This growth forecast, unveiled a day before Sitharaman's Budget presentation for the ongoing financial year, aligns with the International Monetary Fund's estimate of 7%.

The Survey said its growth projection was conservative as investments are expected to remain tepid this year because of fears of cheaper imports from countries having excess capacity.

"The survey conservatively projects a real GDP growth of 6.5-7%, with risks evenly balanced, cognizant of the fact that the market expectations are on the higher side," stated the Economic Survey.

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On the positive side, improved balance sheets will help the private sector cater to a strong investment demand, also helping lift the country's growth prospects, the survey said.

It added that domestic growth drivers continue to support economic growth, and a good spread of monsoons so far this year is likely to improve the performance of the agriculture sector.

Exports are also expected to pick up during the year due to improving growth prospects in advanced economies, the survey said.

The Indian economy recovered swiftly from the pandemic, with its real GDP in FY24 being 20% higher than in FY20. This meant a CAGR of 4.6% from FY20, despite a 5.8% decline in FY21 inflicted by the pandemic.

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The finance ministry had earlier, in a report released days before the interim Budget for 2024-25 was presented on 1 February, estimated India's GDP growth rate at close to 7% for FY25.

In June, the Reserve Bank of India adjusted its growth forecast for FY25 from 7% to 7.2%. Over the past three years, India's growth rate has consistently exceeded 7%.

Prime Minister Narendra Modi, whose Bharatiya Janata Party fell short of reaching the halfway mark in the general election earlier this year, is widely expected to use strong tax collections and a record $25 billion dividend from the Reserve Bank of India to ramp up budget spending to address concerns over uneven economic growth.

“Last year, global exports of goods and services growth fell to 0.5% from 5.2% YoY in 2022. Amidst that, Indian total exports grew 2.63%, thanks to buoyancy in services exports. The economic survey points to a stronger rebound in GFCF that propped up growth as India emerged from the pandemic," said Dr. Rumki Majumdar, economist at Deloitte India.

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"While the government has shouldered a larger responsibility to invest in infrastructure, private investment in IP and machinery too has been strong, growing cumulatively at 35% in four years. But investment in dwellings and structures has been even stronger, pointing to a higher inclination among households to save in physical assets,” said Majumdar.