India’s economic trajectory continues to garner global attention, reflecting its resilience and strategic policy interventions. The recent fiscal projections and economic indicators underscore the nation’s commitment to sustainable growth and fiscal prudence.

Gross Domestic Product (GDP) Projections

According to the first advance estimates released by the National Statistics Office, India’s real GDP is anticipated to grow by 6.4% in the fiscal year 2024-25, with the nominal GDP expected to rise by 9.7% during the same period. Looking ahead, the budget for FY 2025-26 projects a nominal GDP growth of 10.1% over the previous year’s estimates. These figures highlight India’s robust economic momentum amidst global uncertainties.

Inflation Trends

Inflationary pressures have shown signs of moderation. The average retail inflation decreased to 4.9% during April-December 2024, compared to 5.4% in the previous fiscal year. This decline is attributed to subdued core inflation trends and effective supply-side measures by the government, particularly in containing food prices. The Reserve Bank of India projects inflation rates of 4.6% in Q1 and 4.0% in Q2 of FY 2025-26. However, potential geopolitical factors may influence future price levels.

Fiscal Discipline and Deficit Management

The government’s agile fiscal strategy in the post-pandemic era has yielded positive outcomes. The fiscal deficit target has been revised to 4.8% of GDP for FY 2024-25, aligning with the commitment to reduce it below 4.5% by FY 2025-26. Additionally, the Central Government Debt to GDP ratio is projected to decline from 57.1% in FY 2024-25 to 56.1% in FY 2025-26. The government aims to further reduce this ratio to approximately 50±1% by March 31, 2031, ensuring fiscal sustainability.

Capital Expenditure and Revenue Deficit

A significant allocation of ₹11.21 lakh crore (3.1% of GDP) has been earmarked for capital expenditure in FY 2025-26, emphasizing the government’s focus on infrastructure development and long-term economic growth. The revenue deficit is also on a declining trajectory, expected to decrease from 4.8% of GDP in FY 2024-25 to 4.4% in FY 2025-26.

Trade and Current Account Dynamics

India’s merchandise exports experienced a year-on-year growth of 1.6% during April-December 2024, while services exports saw a more substantial increase of 11.6% in the same period. The Current Account Deficit (CAD) moderated to 1.2% of GDP in Q2 FY25, down from 1.3% in Q2 FY24, indicating an improvement in the country’s external balance.

Foreign Direct Investment (FDI) and Foreign Exchange Reserves

FDI inflows witnessed a revival, increasing from USD 42.1 billion during April-October FY 2023-24 to USD 48.6 billion in the corresponding period of FY 2024-25. Furthermore, India’s foreign exchange reserves were estimated at USD 640.3 billion at the end of December 2024, sufficient to cover about 90% of the country’s external debt, thereby providing a robust buffer against external shocks.

In summary, India’s economic indicators reflect a balanced approach towards growth and fiscal consolidation. The government’s policies are geared towards fostering an inclusive economic environment, ensuring stability, and building resilience against global uncertainties.