Economic Survey 2024-25 Highlights

The Economic Survey for 2024-25 was tabled by Finance Minister Nirmala Sitharaman in Parliament on Friday. The Survey is a report of the state of the Indian economy in the financial year that is coming to a close. It is prepared by the Department of Economic Affairs in the Union Finance Ministry, under the guidance of the Chief Economic Advisor (CEA).

The Survey has flagged two main concerns. “Global trade dynamics have changed significantly in recent years, shifting from globalisation to rising trade protectionism, accompanied by increased uncertainty,” the Survey says.

The second big challenge concerns the dominance of China as the world’s manufacturing superpower – a third of all global production happens in China, and it alone manufactures more global output than the next 10 countries put together.

The Survey contends that the domestic economy remains steady amidst global uncertainties.

REAL GDP: Real Gross Domestic Product, which maps economic activity from the demand side of the economy, in the current financial year (FY25) is pegged at 6.4%; in the coming year (FY26), the Survey expects it to lie between 6.3% and 6.8%.

GVA: On the supply side, which is mapped by Gross Value Added (GVA), India’s growth remains close to the decadal average (Chart). Aggregate GVA surpassed its pre-pandemic trend in the first quarter of FY25, and it now hovers above the trend, the Survey points out.

INFLATION: “Headline inflation”, the CEA said, “is moderating because of moderating core inflation”. Core inflation refers to inflation in goods and services except food and fuel. However, food inflation increased from 7.5% in FY24 to 8.4% in the current financial year, “driven by factors such as supply chain disruptions and vagaries in weather conditions”.

EMPLOYMENT: The Survey says “India’s labour market growth in recent years has been supported by post-pandemic recovery and increased formalisation.” It quotes the 2023-24 annual Periodic Labour Force Survey (PLFS) report that shows that all key employment related metrics such as unemployment rate, labour force participation rate and the worker-to-population ratio (WPR) have improved.

Referring to the Business Reform Action Plan (BRAP) formulated by the Department for Promotion of Industry and Internal Trade (DPIIT), the Survey states that there is a positive correspondence between business reforms and the level of industrial activity, suggesting the need for deregulation and enterprise-friendly reforms in aspiring and emerging states.

While the Survey sounds sanguine about India’s post-pandemic economic recovery, on the whole, it sounds an alert. “India faces limitations in producing critical goods at the scale and quality required to serve the infrastructure and investment needs of an aspiring economy,” says the preface of the Survey.

‘“Getting out of the way” and allowing businesses to focus on their core mission is a significant contribution that governments around the country can make to foster innovation and enhance competitiveness,” the CEA has said.

The Economic survey projected a growth rate of 6.3-6.8 per cent for 2025-26 on the back of a “strong external account, calibrated fiscal consolidation and stable private consumption”, and said domestic growth levers will be more important than external ones in the coming years for the Indian economy.

In his seven-page preface to the Economic Survey 2024-25, the CEA, who is the force behind the Ministry of Finance’s Economic Division, chose “deregulation” as his central theme because “getting out of the way” is not easy for societies like India’s.

The Economic Survey underscored that deregulation is more essential for growth of micro, small, and medium enterprises (MSMEs) vis-à-vis large companies. It also called for states to take the lead in Ease of Doing Business (EoDB) 2.0.

The Survey stated the Indian economy will need to grow by around 8 per cent in real terms every year for at least a decade to achieve a sustained rise in standard of living, and much of that growth would need to come from the domestic sector.

The Survey stated the Indian economy will need to grow by around 8 per cent in real terms every year for at least a decade to achieve a sustained rise in standard of living, and much of that growth would need to come from the domestic sector.

The Survey noted that while the government has pursued policies to support MSMEs, like boosting access to finance and providing market linkages, the regulatory compliance burden has remained a challenge, which prevents small firms from growing.

It said that the faster economic growth that India needs is only possible if the union and state governments continue to implement reforms that allow SMEs to operate efficiently and compete cost-effectively.

The Survey pitched for EoDB 2.0 to be a state government-led initiative “focused on fixing the root causes behind the unease of doing business”. While EoDB reforms so far have dealt with reducing compliance burdens, digitisation, and extending incentives to key sectors, the second round should prioritise liberalising standards and controls, including removing restrictions on women’s participation in factories and rationalising parking norms, it said.

The Survey recommended that states should look at regulations pertaining to administration, land, building and construction, labour, utilities, transport, logistics, local trade, and environment, in addition to any sector-specific regulations.

The Survey also pushed for greater private sector participation in building approvals and inspections… It also called for reducing electricity tariff markup for industrial users. “Across states, industrial users can pay a 10–25% markup over the cost of electricity supply.

The Economic Survey 2024-25 has warned that excessive financialisation can harm the economy, with potentially severe consequences for a low-middle-income country like India.

While acknowledging the increasing reliance on financial markets for funding, the Survey emphasized that financial markets must complement the banking sector to bridge the capital requirement gap.

The Survey warned that “over-finance” can lead to the financial sector competing with the real sector for resources, including skilled labour. This can result in the real economy being deprived of essential resources.

The Survey also noted that financial sector innovation may not always add value to the real economy. Research has shown that rapid financial sector growth often favours projects with high collateral but low productivity, such as construction.

The Survey also emphasized the importance of finance in reducing poverty and inequality, as well as in aiding consumption smoothing and shock absorption for firms and households.

However, the Survey warned that there is a tipping point beyond which financial development can actually hinder economic growth.

Citing examples from Ireland and Thailand, the Survey noted that excessive private credit growth can lead to reduced productivity growth, while prudent management of credit can contribute to increased productivity.

The Survey proposed the concept of “stewarding institutions,” which would be “agile, crosscutting across sectors and up to date on the latest developments, so that they are equipped to identify both opportunities and threats. Stewarding institutions will have to be responsible for designing an approach that delicately balances public welfare without stifling innovation”.

It clarified that stewarding “does not imply placing restrictions on innovation or dictating a narrow set of applications for technology,” but means that policymakers should “demonstrate a certain degree of cognisance when it comes to emerging technologies, so that when the need arises, they stand well-placed to mitigate any adverse effects that emerge as by-products of technological applications”.

Regulatory frameworks will need to be revisited and amended to ensure that the use of AI aligns with societal values, balancing innovation with accountability and transparency, the Survey said.

Arguing that each revolution has displaced large segments of the workforce and led to economic disparity, the Survey said that “protracted labour displacement is something that a labour-surplus country like India cannot afford”.

“India is also a consumption based economy, thus the fall in consumption that can result from the displacement of its workforce is bound to have macroeconomic implications. If the worst-case projections materialise, this could have the potential to set the country’s economic growth trajectory off course,” it added.

Looking ahead, the Survey said, the country’s predominantly services-driven economy, coupled with its young and dynamic population, offers a fertile ground for leveraging the benefits of emerging technologies, only if proactively and carefully managed.

Days after a Chinese artificial intelligence (AI) lab launched the low-cost foundational model DeepSeek, the Indian government has said it has decided to build a domestic large language model of its own as part of the Rs 10,370 crore IndiaAI Mission.

Under the IndiaAI Mission, the government has also selected 18 application-level AI solutions for the first round of funding. Vaishnaw said that these applications focus on the areas of agriculture, learning disabilities and climate change.

The Economic Survey 2024-25 flagged inflexible working hour limits and overtime restrictions for factory workers as barriers to meeting demand surges and improving workers’ earning potential.

While noting that working hour restrictions are intended to protect workers’ health and prevent overwork, the Survey underscored that the various limits on working hours—per day, week, quarter, and year—could be in conflict, which in turn reduces workers’ earning potential by heavily restricting the number of overtime hours they can put in.

The Factories Act limits a worker to a maximum of 10.5 hours daily, or around 63 hours in a six-day week. Of these, only 48 hours are considered regular work hours, three hours are considered rest intervals, and the remaining 12 hours count as overtime.

Over a 13-week quarter, this would allow for 156 overtime hours, but another provision of the Factories Act caps overtime at only 75 hours per quarter. Unlike India, some countries allow such caps to be averaged over multiple days and weeks.

The Centre has notified four Labour Codes – the Code on Wages, 2019, the Code on Social Security, 2020, the Industrial Relations Code, 2020, and the Occupational Safety, Health, and Working Conditions Code, 2020 – after rationalising and combining 29 existing central laws. In line with the Labour Codes, several states have already carried out reforms, the Survey said.

The Survey said the promise of just $300 billion in climate finance flows, instead of the projected requirement of more than $1 trillion a year, severely undermined the objectives of the Paris Agreement.

“The decision (in Baku) demonstrates a significant misalignment with the Paris Agreement’s mandate to demonstrate a ‘progression beyond previous efforts’ by developed countries,” the Economic Survey said.

Going by the Paris Agreement, India, like other countries, has to submit its climate action plan for 2035 this year. As of now, countries have submitted, and are acting on, achieving targets outlined in their climate plans for 2030. The Paris Agreement asks every country to periodically increase the ambition of their climate targets, in five-year cycles.

As per its climate plan for 2030, India has committed itself to reduce the emissions intensity of its economy (emissions per unit of GDP) by 45 per cent from 2005 levels, ensure that at least 50 per cent of its installed electricity capacity comes from non-fossil fuel sources, and increase the capacity of its forests to absorb carbon dioxide by at least 2.5 to 3 billion tonnes.

The Economic Survey said the decision in Baku showed the unwillingness of the developed countries to fulfill their obligations under the international climate architecture.

The COP29 climate meeting in Baku ended in disappointment last week. On the main issue of finance, developed countries agreed to mobilise only $300 billion for the developing nations every year, a three-times increase over their current mandate of $100 billion but way short of at least $1 trillion that all assessments said was required.

It is not a surprise that the current international arrangement on climate change has turned out to be this ineffective. It is the only major multilateral system which is completely aligned against the rich and powerful nations.

The developed countries argue that the scale of finance requirements has increased manifold, and many other countries have grown rich in the last two decades, so they must also be asked to contribute to climate finance. The first attempt to expand the contributor base happened in Paris itself but did not succeed.

The challenge, the economic survey says, is the convenience, hyper-palatability, and longer shelf lives of these products along with vigorous advertising, has made ultra-processed foods an increasing part of Indian diets.

The report suggests a multi-pronged strategy to address the issue: One, it suggests that the Food Safety and Standards Authority of India (FSSAI) bring ultra-processed foods under a regulation with clear definitions and standards for such products, including stricter labelling norms.

Two, it suggests improved monitoring of branded products to ensure compliance of such norms, adding further that self-regulation by the industry has not been effective. Three, strengthened consumer protection efforts have been suggested to deal with aggressive marketing and misleading advertising.

Four, the survey says that a higher tax rate for ultra-processed foods may be considered, targeted specifically towards brands and products that are advertised. Five, and importantly, it suggests creating awareness among consumers, especially children and adolescents to whom many of these products are marketed.

Prime Minister Narendra Modi has highlighted the need for controlling obesity from a younger age lest it become a public health epidemic and asked people to focus primarily on increasing their physical activity and controlling oil in their diet.

Ultra-processed foods are essentially industrially prepared ready-to-eat formulations that are derived from a limited variety of crops such as wheat or soy, and contain additives for enhancement of taste.

The new National Dietary Guidelines, released by ICMRs National Institute of Nutrition last year, defines ultra-processed foods as those that have undergone extensive industrial processing and contain high number of additives such as preservatives, sweeteners, emulsifiers, that are not generally used in kitchens.

These foods are known to cause and increase the risk of several conditions such as obesity, diabetes and other metabolic conditions, gastrointestinal diseases, and cancers among others.

With Indian consumption growing at less than 3 per cent, the country is not as big a deal for global exporters as you might imagine. The supposed opportunity for India provided by investment moving out of China has barely materialised.

India gets barely 1.5 per cent of international tourist arrivals. Its entertainment sector is growing rapidly, but including the total domestic market, it is only 5 per cent of the world market; it is not a soft-power export powerhouse. India’s defence budget has been relatively stagnant, with a proportion of GDP under 2 per cent.

But on any measure of critical technologies for the future, whether it is AI or green energy, India seems far behind the global competition.

DeepSeek has spurred the search for homegrown Indian AI models, but the track record on being at the frontier of this competition is not encouraging.

India has enormous potential. But unless we take a cold hard look and acknowledge that self-importance is not the same thing as importance, we will not begin to understand how India risks being irrelevant.

DeepSeek is a Chinese AI company located in Hangzhou, founded by entrepreneur Liang Wenfeng, who also serves as the CEO of the quantitative hedge fund High Flyer.

Recently, DeepSeek launched its AI models—DeepSeek-V3 and DeepSeek-R1, a reasoning model. These models quickly gained popularity, surpassing ChatGPT to become the most downloaded app on the App Store.

During the recent Republic Day celebrations, education was front and centre. In the parade of tableaux, we saw symbolic reminders of India’s commitment to nation-building through education…. But the real hero behind this success story is the NIPUN Bharat Mission.

NIPUN Bharat, or the National Initiative for Proficiency in Reading with Understanding and Numeracy, was launched in 2021 and has quietly transformed classrooms by targeting literacy and numeracy in the early grades.

The programme allocates Rs 500 per child for teaching-learning materials (TLM), empowering schools to craft vibrant, engaging lessons tailored to young learners. For teachers, who are the backbone of this mission, the states receive up to Rs 5,000 for capacity-building workshops, along with Rs 150 for resource materials to support the classroom strategies of teachers.

States are empowered with Rs 10-20 lakh each to conduct comprehensive assessments, track the progress of learning outcomes of students and identify gaps in teaching and learning practices. To ensure seamless implementation and oversight, Rs 25 lakh to Rs 1 crore is provided for establishing robust Project Management Units at the state and district levels.

In Uttar Pradesh, Ravi Sharma, a primary school teacher, uses songs to teach mathematics. His students chant, “ek-do thaila lo, teen-chaar chalo bazaar”, learning numbers as they sway to the rhythm.

The data backs up these anecdotes. In UP, ASER 2024 shows a leap in Grade III students’ ability to read Grade II-level texts — from 24 per cent to 34 per cent — and solve subtraction problems, which improved from 29 per cent to 41 per cent between 2022 and 2024. Odisha’s innovative use of colourful and contextualised workbooks has led to similar gains. Nationally, millions more children can now read and solve basic math problems.

To sustain these gains — and expand them — the mission’s timeline must be extended. An enhanced NIPUN 2.0 should be extended to at least 2030. This will allow interventions to take root and achieve deeper impact.

NIPUN 2.0 should also focus on Early Childhood Education (ECE): Investments in preschool education can set children up for success before they even enter primary school.

The ASER results prove that progress is possible. With the right tools, resources and policies, India can ensure that every child, regardless of geography or circumstance, has access to quality education.

The Centre launched the NIPUN (National Initiative for Proficiency in Reading with Understanding and Numeracy) Bharat Mission on July 5, 2021. The mission has seen energetic implementation in many states, with a new framework for the foundational stage of education developed and released well before frameworks for other stages.

This framework includes teacher training oriented towards the new goals, specially designed teaching-learning materials for use by children and teachers in early grade classrooms, etc.

For children between 3 to 6 years, two key findings are worth highlighting: first, preschool coverage rose between 2018 and 2024. ASER data also show that by 2024, the proportion of rural children of age 3 who are enrolled in some kind of early childhood education program was 77.4%. This is truly a major achievement for a country as diverse as India.

1. National Education Policy 2020 is in conformity with the Sustainable Development Goal-4 (2030). It intends to restructure and reorient education system in India. Critically examine the statement.