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The Economic Survey indicates a steady economic growth while maintaining stable prices.


The survey indicates that the Indian economy is stable and resilient despite geopolitical challenges. It highlights that the economy has rebounded post-Covid, returning to its pre-pandemic growth trajectory, with growth rates of 8.2 percent in FY24, and 7.0 and 9.7 percent in the two preceding years. For FY25, inflation is projected at 4.5 percent, with an anticipated nominal growth of 11 percent.

The lower growth forecast is due to a challenging global economic environment characterized by high interest rates and inflation. Survey authors suggest that much of the effort to sustain growth will need to be domestic. Sakshi Gupta, principal economist at HDFC Bank, notes several risks including the monsoon, the early stages of private capital expenditure recovery, and global geopolitical issues.

The government may need to closely monitor growth and implement remedial measures if it begins to falter. While corporate profits have been rising, weak wage growth could negatively impact consumer spending, which accounts for nearly 60 percent of economic growth. Government spending and exports are the other significant growth drivers.

Global inflation control has been favorable for growth, with India being closer to its inflation target than many major economies. Post-financial crisis, Western economies experienced inflation below 2 percent, which surged to 5-7 percent due to lockdown stimuli. This led the US Fed to increase policy rates to 5-5.25 percent. In contrast, India's consumer price inflation remained below the 6 percent upper band for extended periods and is expected to stabilize around the 4 percent target. However, the long-term impact of climate change on global inflation remains uncertain.

Policymakers are also concerned about excessive speculative activity in the stock markets. The survey warns that over-financialization has historically been detrimental, even for large economies, and India must avoid this at its current development stage. Potential regulatory interventions may be announced in the upcoming Budget, as both the Economic Survey, SEBI, and the Reserve Bank of India have expressed concerns about increased stock market activity. The financial sector needs to grow in alignment with overall economic growth.


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