Govt estimates FY25 GDP growth at closer to 7%

The strength of domestic demand has driven the economy to an over 7% growth rate in the last three years. The robustness seen in domestic demand, namely, private consumption and investment, traces its origin to the reforms and measures implemented by the government over the last ten years.

The supply side has also been strengthened with investment in infrastructure—physical and digital—and measures that aim to boost manufacturing. These have combined to provide an impetus to economic activity in the country.

Accordingly, in FY25, real GDP growth will likely be closer to 7%. The findings have been shared in a report 'Indian Economy—A Review' prepared by the office of the Chief Economic Adviser V Anantha Nageswaran, taking stock of the state of the Indian economy and its journey in the last ten years.

This is not the Economic Survey of India prepared by the Department of Economic Affairs, the report said, while adding that it will come before the full budget after the general elections.

There is, however, considerable scope for the growth rate to rise well above 7% by 2030. The speed with which physical infrastructure is being built will allow the ICOR to decline, translating private investments into output quickly.

The IBC has strengthened balance sheets and, in the process, has freed up economic capital that was otherwise rendered unproductive.

The rapidly expanding digital infrastructure is continuously improving institutional efficiency.

Technological progress is picking up pace with rising collaboration with foreign partners in the production of goods and services. Decisive steps have been taken to speed up human capital formation.

Finally, the overall investment climate is increasingly becoming more favourable with sustained enhancements in the ease of doing business.

The unification of the domestic markets brought in by the adoption of the GST incentivises production on a larger scale while reducing logistics costs.

The expansion of the tax base that the GST facilitates will strengthen the finances of the Union and state governments, enabling growth-enhancing public expenditures.

The rising credibility of the RBI in restraining inflation will anchor inflationary expectations, providing a stable interest rate environment for businesses and the public to make long-term investment and spending decisions, respectively.

First: Increased geoeconomic fragmentation, slowdown of hyper-globalisation are likely to result in further friend shoring and onshoring, friend shoring and onshoring are already having repercussions on global trade and global growth.

Second, trade-off between energy security and economic growth versus energy transition is a multifaceted issue having various dimensions: geopolitical, technological, fiscal, economic, and social, and the policy actions being pursued by individual countries impacting other economies.

Third, the advent of artificial intelligence (AI) poses a big challenge to governments around the world due to the questions it poses to employment, particularly in services sector.

This was recently highlighted in an IMF paper estimating that 40% of global employment is exposed to AI, with the benefits of complementarity operating beside the risks of displacement.

Further, the paper suggests that developing economies must invest in infrastructure and a digitally skilled labour force to fully harness AI’s potential.

Fourth, domestically, ensuring the availability of a talented and appropriately skilled workforce to the industry, age-appropriate learning outcomes in schools at all levels, and a healthy and fit population are important policy priorities in the coming years. A healthy, educated, and skilled population augments the economically productive workforce.