With Sanskriti (culture) and Pragati (progress) moving in tandem, India stands on the brink of an economic transformation-one that is propelling the nation towards becoming the world’s third-largest economy. Driven by the guiding principles of Reform, Perform, and Transform, the government has laid a robust foundation for economic expansion through bold policy measures, strategic interventions, and a commitment to inclusive growth.
At the heart of this transformative journey is the Economic Survey 2024-25, which, despite global economic turbulence, presents a confident yet pragmatic assessment of India’s economic trajectory. While economies worldwide grapple with geopolitical uncertainties, supply chain disruptions, and inflationary pressures, India continues to defy global headwinds, reaffirming its status as one of the fastest-growing major economies.
The data speaks volumes. India’s GDP expanded by an impressive 6.4 per cent in FY25, driven by a resurgence in rural demand, a boom in infrastructure investment, and a stellar performance by the services sector. Key economic contributors such as agriculture (3.8 per cent) and industry (6.2 per cent) outperformed their historical averages (FY15-FY24), indicating broad-based growth momentum. The Indian economy is projected to expand at a rate of 6.3 per cent to 6.8 per cent in the financial year 2025-26 (FY26)
Private Final Consumption Expenditure (PFCE)-a cornerstone of aggregate demand-is projected to grow at 7.3 per cent, underscoring robust household spending, particularly in rural areas. A strong rebound in consumption has been evident in rising sales of two-wheelers, three-wheelers, and tractors, signalling increased purchasing power and consumer confidence. A resurgent manufacturing sector is a cornerstone of India’s economic revival, as reflected in its Purchasing Managers’ Index (PMI), which has consistently remained in the expansionary zone. In December 2024, the PMI surpassed long-term averages, fueled by strong order books, rising exports, and resilient domestic demand.
Business sentiment remains overwhelmingly positive, with firms anticipating higher production, improved order inflows, and greater capacity utilisation in the coming quarters. The Production-Linked Incentive (PLI) scheme has played a pivotal role in attracting private investments, reinforcing India’s position as a global manufacturing powerhouse. Investment remains the backbone of India’s economic expansion. According to the RBI’s latest report, private investment commitments surged from `1.6 Lakh Crore in FY24 to `2.45 Lakh Crore in FY25. The public sector, particularly in infrastructure development, has been a critical catalyst, with General Government Capital Formation (GFCF) growing at 13.1 per cent, outpacing overall investment growth between 2019 and 2023.
The government’s commitment to high-quality capital expenditure is evident, with capital spending now constituting 21.4 per cent of total expenditure, up from 13 per cent in FY21. Additionally, the National Monetisation Pipeline (NMP) has unlocked `3.86 Lakh Crore worth of private capital across key infrastructure sectors, enhancing long-term growth potential. Infrastructure development remains a cornerstone of India’s growth strategy, with a paradigm shift from a project-based approach to a corridor-based one. The National Highway Network has expanded from 91,287 km in 2014 to 1.46 lakh km in 2024. Airport infrastructure investments exceeded `91,000 Crore (FY20-FY25) to modernise key hubs and expand air traffic capacity. Port efficiency has surged, with operational capacity growing from 3 MTPA in FY24 to 21 MTPA in FY25. Renewable energy has seen remarkable progress, with installed capacity reaching 456.7 GW as of November 2024, of which 47 per cent comes from renewables. Meanwhile, the Jal Jeevan Mission (JJM) has transformed rural water accessibility, with tap water connections rising from 17 per cent in 2019 to 79.1 per cent in 2024.
Despite external headwinds, India’s services exports continue to offset a widening merchandise trade deficit. In response to shifting global policies, India is expanding its trade footprint into high-value sectors such as biotechnology, semiconductors, and quantum computing. Strategic partnerships in space, AI, and telecommunications further bolster India’s positioning as a leader in advanced technology industries. India has made remarkable strides in research and development (R and D), with patent filings more than doubling since 2014-15 and patent grants increasing seventeen-fold. However, Gross Expenditure on R and D (GERD) remains at 0.64 per cent of GDP, significantly lower than global counterparts like China, Japan, and the US, where business-funded R and D exceeds 70 per cent. Strengthening industry-academia collaboration and fostering innovation-led entrepreneurship remain key imperatives for the next phase of economic transformation.
India’s labor market transformation is evident in a steady decline in unemployment from 6per cent in 2017-18 to 3.2 per cent in 2023-24. Formal employment has seen rapid expansion, with EPFO subscriptions surging from 61 lahks in FY19 to 131 lahks in FY24. Encouragingly, 47 per cent of new payroll additions are in the 18-25 age group, highlighting a youth-driven workforce expansion. The integration of AI-driven employment solutions will be pivotal in shaping India’s future labour market dynamics.
India’s financial sector is experiencing an unprecedented boom. The nation’s share in global IPO listings rose from 17per cent in 2023 to 30per cent in 2024, reflecting growing investor confidence. Retail participation has also skyrocketed, with demat accounts increasing by 33 per cent YoY to 18.5 crore. However, India’s corporate bond market remains underdeveloped, with bond market capitalisation at 18 per cent of GDP, significantly lower than Korea (80 per cent) and China (36 per cent). Strengthening policy measures to deepen bond market participation remains a crucial area for financial sector reform.
The MSME sector is the backbone of India’s economy, playing a critical role in employment generation and GDP growth. To support this vital sector, the government has introduced several key reforms, including the Self-Reliant India (SRI) Fund, providing `50,000 Crore in equity funding for high-potential MSMEs. Digital platforms such as MSME Samadhan and CHAMPIONS Portal have streamlined compliance, while the Trade Connect e-Platform has optimised supply chains. Despite these reforms, access to institutional capital remains a challenge, underscoring the need for further deregulation and enhanced credit availability.
The Economic Survey 2024-25 reaffirms India’s position as an economic powerhouse, driven by robust GDP growth, expanding investments, and a resilient infrastructure framework. With unwavering policy commitment, strategic foresight, and an innovation-driven agenda, India is not just navigating global uncertainties-it is shaping the future of the global economy. The journey towards a $5 Trillion economy is not a distant dream but an inevitable reality propelled by Reform, Perform, and Transform.
The writer is a professor of finance at Xavier School of Management, XLRI
