India’s domestic economy remains steady amidst global uncertainties, driven by robust growth in the services sector, a rebound in agriculture, and the industrial sector picking up momentum on the back of rising private consumption, according to the Economic Survey tabled in Parliament on Friday.
As per the first advance estimates released by the National Statistical Office, the real Gross Domestic Product (GDP) growth for FY25 is estimated to be 6.4 percent, the survey points out.
The survey highlights that, from the perspective of aggregate demand in the economy, private final consumption expenditure at constant prices is estimated to grow by 7.3 percent, driven by a rebound in rural demand. Private consumption as a share of GDP (at current prices) is estimated to increase from 60.3 percent in FY24 to 61.8 percent in FY25. This share is the highest since FY03. Gross fixed capital formation (at constant prices), which reflects the investment taking place in the economy, is estimated to grow by 6.4 percent.
On the supply side, real Gross Value Added (GVA) is also estimated to grow by 6.4 percent. The agriculture sector is expected to rebound with growth of 3.8 percent in FY25. The industrial sector is estimated to grow by 6.2 percent in FY25, the survey states.
Strong growth rates in construction activities, electricity, gas, water supply, and other utility services are expected to support industrial expansion. Growth in the services sector is expected to remain robust at 7.2 percent, driven by healthy activity in financial, real estate, professional services, public administration, defense, and other services, according to the Survey.
The agriculture sector remains strong, consistently operating well above trend levels. The industrial sector has also found its footing above the pre-pandemic trajectory. The robust growth in recent years has brought the services sector close to its trend levels, it adds.
The survey highlights that geopolitical risks remain elevated due to ongoing conflicts, which pose significant risks to the global economic outlook. In this context, it underlines the importance of strengthening the levers of domestic growth.
These global risks can influence growth, inflation, financial markets, and supply chains. An intensification of the ongoing conflicts in the Middle East or the Russia-Ukraine conflict could lead to market repricing of sovereign risk in the affected regions and disrupt global energy markets. While the oil market is well-supplied for now, any damage to energy infrastructure could tighten supply, adding uncertainty to the global economic outlook, the Survey states.
Tensions in the Middle East have disrupted trade through the critical Suez Canal route, which accounts for 15 percent of global trade. In response, several shipping companies have diverted their ships around the Cape of Good Hope, increasing delivery times by 10 days or more on average. These disruptions have led to higher freight rates along major shipping routes, which in turn impact global trade activity, the Survey adds.
