 "Indian economy expected to grow 6.3-6.8% in 2025-26: Economic Survey")
India’s economy is projected to expand between 6.3 per cent and 6.8 per cent in the financial year 2025-26 (FY26), according to the Economic Survey presented in Parliament by Finance Minister Nirmala Sitharaman on Friday.
The forecasts are in line with economic growth predictions made by international agencies such as the International Monetary Fund (IMF), Asian Development Bank (ADB) and World Bank. The IMF has kept India's GDP growth forecast unchanged at 6.5 per cent for FY25 and FY26. The World Bank has maintained a projection of 6.7 per cent. The ADB in December 2024, also revised India's GDP growth forecast for FY25 to 6.5 per cent from 7 per cent. For FY26, the growth forecast was revised to 7 per cent from 7.2 per cent.
This adjustment reflects weaker-than-expected growth in the July-September quarter, driven by slowdowns in manufacturing and government spending.
Slower growth expected
The latest forecast reflects a moderation in growth compared to previous estimates, partly due to weaker-than-expected expansion in the July-September quarter of FY25. Key factors behind this slowdown include sluggish manufacturing activity and reduced government expenditure.
The revised expectations contrast with last year’s Economic Survey projection of 6.5-7 per cent growth for FY25 and the Reserve Bank of India’s (RBI) latest forecast of 6.6 per cent for the same period. Meanwhile, the first advance estimate released by the government on January 7 predicts GDP growth of 6.4 per cent in FY25.
Also Read
GDP growth in FY24
For the last financial year, India posted a robust GDP growth of 8.2 per cent. The Economic Survey, published in July 2024, had forecast growth for FY25 between 6.5 to 7 per cent. In a revision released in November, the finance ministry adjusted its projections to 6.5 per cent, highlighting the impact of the Reserve Bank of India’s (RBI) monetary policy stance as a key factor contributing to the slowdown in the first half of FY25.
Inflation rates in India
Inflation has been a persistent challenge, staying above the RBI's medium-term target of 4 per cent for most of the past year. At the same time, the rupee has experienced consistent depreciation, despite the RBI's intervention, including the sale of tens of billions of dollars in reserves.
India’s retail inflation, as measured by the Consumer Price Index (CPI), was 5.22 per cent in December, slightly lower than the 5.48 per cent recorded in November. November’s CPI had decreased from a 14-month high of 6.21 per cent in October, bringing it within the RBI’s tolerance range of 2 to 6 per cent. Inflation in rural areas stood at 5.76 per cent, while urban inflation was lower at 4.58 per cent.
The Union Budget for 2025-26 will be presented by Finance Minister Nirmala Sitharaman on February 1.