Introduction
India's GDP growth rate has remained healthy over the past five years. It was 6.8% in FY19 and grew significantly to 8.2% in FY24. For FY25, it is projected to be around 6.4%. The slowdown in current fiscal is primarily due to a general slowdown in consumer spending and a contraction in central government expenditure. However, the outlook remains positive as easier monetary policy and a reduction in tax burden are expected to boost consumption demand. Additionally, export performance has experienced remarkable growth over the past decade, reflecting the increasing credibility and demand for Indian products in the global marketplace. India's total exports touched Rs. 67,58,486 crore (US$ 778 billion) in FY24, a significant increase from Rs. 40,48,142 crore (US$ 466 billion) in FY14, representing a growth of nearly 67%. During this period, India's share of world merchandise exports also improved, rising from 1.66% to 1.81%, advancing the country from 20th to 17th position globally.
The demographic transition, marked by a lower infant mortality rate and a consistent growth in literacy rates, further enhances India's advantageous position. With improved income distribution, heightened employment rates, and globally competitive social amenity provisions, there is potential for India's per capita GDP to expand in the next 25 years, mirroring the growth seen in the preceding 75 years. The Reserve Bank of India (RBI) estimates India's real GDP growth to be 6.6% for FY25 and 6.7% for FY26.
In the Union Budget 2025-26, the government proposed to increase allocation for capital expenditure to Rs. 11.21 lakh crore (US$ 129.0 billion), up 10.1% from revised budget estimate of Rs. 10.18 lakh crore (US$ 117.2 billion) in 2024-25.
In 2024-25, the following key indicators highlighted improved performances:
- Private Final Consumption Expenditure (PFCE) at constant prices, has witnessed a growth rate of 7.3% during FY25 over the growth rate of 4.0% in FY24.
- In recent years, the agriculture sector in India has shown robust growth, averaging 5% annually from FY17 to FY23, demonstrating resilience despite challenges. In Q2 of FY25, the agriculture sector recorded a growth rate of 3.5%.
- Consumer Price Index (CPI) – Combined inflation was 4.31% in January 2025, a slight decrease from 5.10% from January 2024.
- Services PMI has increased to 61.1 in February 2025 as compared to 56.5 in January 2025, mainly driven by enhanced business activity.
- The consumption of petroleum products during FY25 (April-January 2025) stood at 199.219 MMT in volume terms.
- Quick Estimates for India’s Index of Industrial Production (IIP) for December 2024 stood at 157.2 as against 148.1 for November 2024.
- The combined index of eight core industries stood at 161.6 for FY25 (April-December) against 155.1 for FY24 (April-December).
- Cargo traffic handled at major ports stood at 698.49 million tonnes (MMT) during April-January FY25.
- Railway freight traffic stood at 1,038 million tonnes during FY25 (as of November).
- A total of 118.2 crore e-way bills were raised in January 2025 as compared to 112.0 crore raised in December 2024, reaching an all-time high.
- The gross GST (Goods and Services Tax) revenue collection stood at Rs. 1.96 lakh crore (US$ 22.56 billion) in January 2025; positive trends were observed across components including CGST, SGST, IGST, and Cess collections, with significant inter-governmental settlements contributing to revenue distribution among states/UT.
- As of February 24, 2025, the Indian basket of crude oil stood at Rs. 6,767.72 (US$ 77.63) a barrel, decreasing from January 2025, which was Rs. 6,951.13 (US$ 80.20).
- In January 2024, UPI volume stood at 16,996.00 million transactions worth Rs. 23.48 lakh crore (US$ 270.29 billion).
- India’s merchandise exports for January 2025 were estimated at Rs. 3,16,467 crore (US$ 36.43 billion).
- Merchandise imports for January 2025 were estimated at Rs. 5,16,182 crore (US$ 59.42 billion).
- The average daily net injection under the Liquidity Adjustment Facility (LAF) stood at Rs. 84,553 crore (US$ 9.73 billion) as on February 16, 2025.
- In FY25, as of February 14, 2025, foreign exchange reserves in India stood at Rs. 55,19,832 crore (US$ 635.72 billion).
- As of January 10, 2025, the currency in circulation (CIC) registered Rs. 35.95 lakh crore (US$ 413.84 billion).
- Rupee strength reached Rs. 86.64/US$ as of February 23, 2025.
- The total Foreign Direct Investment (FDI) equity inflow received by India in FY25 (July to September 2024) amounted to US$ 19.81 billion.
- According to RBI:
- Bank credit stood at Rs. 177.42 lakh crore (~US$ 2.04 trillion) as of December 27, 2024.
- Credit to non-food industries stood at Rs. 176.86 lakh crore (~US$ 2.04 trillion) as of December 27, 2024.
In the months leading up to January 2025, India's annual retail price inflation had been on a declining trend from 5.24% in November 2024 to 5.22% in December 2024 with further improvement to 4.31% in January 2025. The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 6.25%, marking the first cut in five years since 2020. This move aims to stimulate economic growth by lowering borrowing costs, encouraging business expansion and investment, and ultimately leading to increased production and job creation.
During CY24, Private Equity (PE) and Venture Capital (VC) investments stood at Rs. 4,86,472 crore (US$ 56.0 billion) across 1,352 deals.
According to the Economic Survey 2024-25, from July to November 2024, the government's capital expenditure increased by 8.2%, with the defence, railways, and road transport sectors collectively representing 75% of the total capital outlay.
In addition, steady growth momentum in service activity continues with healthy PMI levels from October 2024 to January 2025, attributing to the growth in output and accommodating demand conditions, leading to a sustained upturn in sales. The growth impetus in rail freight and port traffic remains upbeat, with further improvement in the domestic aviation sector. Strong growth in fuel demand, domestic vehicle sales, and high UPI transactions also reflect healthy demand conditions.
The narrowing merchandise trade deficit and the upward trajectory of net services receipts are anticipated to contribute to an enhancement in India's current account deficit.
The Union Budget 2025-26, themed "Sabka Vikas," focuses on balanced growth across regions. It prioritizes agriculture, MSMEs, investment, and exports as key growth engines. Initiatives include the Prime Minister Dhan-Dhaanya Krishi Yojana for agriculture, support for first-time entrepreneurs, and a push for domestic manufacturing through customs duty rationalization. The budget also emphasises education, healthcare, and infrastructure development, with plans for 50,000 Atal Tinkering Labs and new medical colleges.
In the near future, India’s banking and financial sector is expected to thrive. Despite foreign investors booking profits in the capital market, the outlook remains largely positive for the country. As global conditions stabilise, foreign investors are expected to re-enter the market and capture the upcoming growth wave. The collective efforts invested over the past several years have laid a robust foundation, providing a sturdy platform upon which the framework of a middle-income economy can be built.
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