The Economic Survey will be presented first in the Lok Sabha at 12 noon, followed by the Rajya Sabha at 2 PM, in line with parliamentary procedures. This document, compiled by the Economic Division of the Department of Economic Affairs under the supervision of the Chief Economic Adviser, offers a detailed review of India’s economic performance over the previous financial year (April-March 2024-25) and provides an outlook for the next fiscal year.

The Economic Survey is crucial as it not only outlines key economic indicators and trends but also sets the stage for the Union Budget, offering valuable clues about the government’s fiscal policy, potential reforms, and the budget’s broad focus areas.

The History and Significance of the Economic Survey

The Economic Survey has been an integral part of India’s budgetary process since its inception in 1950-51. Initially included as part of the Union Budget documents, the Survey was separated from the Budget in the 1960s and presented a day before the Union Budget. Over the years, it has evolved into a comprehensive and data-driven document that provides an assessment of the country’s economic health and growth prospects.

The Survey has also had a tradition of adopting central themes that highlight critical issues affecting the economy. For instance, in 2022, the theme was ‘Agile Approach’, reflecting India’s adaptive economic strategies in response to the COVID-19 pandemic. In 2023, the theme was ‘Recovery Complete’, celebrating the broad-based recovery from the pandemic’s economic shock. Last year, the 2024 Survey focused on ‘Economic Resilience’, emphasizing India’s ability to withstand external challenges like global inflation and geopolitical tensions.

This year, attention will be focused on the central theme of the Economic Survey, which could signal the government’s strategy for addressing weaker GDP growth and consumption concerns. India’s GDP growth slowed to 5.4% in the July-September quarter of 2024-25, lower than expected, with forecasts for the full year now revised to 6.4-6.6%. The Economic Survey will provide insights into how the government plans to address these economic headwinds in the upcoming Budget.

Economic Context and the Road to Budget 2025

As the Indian economy grapples with slow growth, consumption challenges, and global uncertainties, the Budget 2025 will be scrutinized for measures to revitalize growth. India’s economy had registered impressive growth rates of 8.2% in 2023-24 and 8.7% in 2021-22, but the pace has cooled down recently. The Reserve Bank of India (RBI) has downgraded its growth forecast for 2024-25 to 6.6%, while the government’s estimate is slightly more optimistic at 6.4%.

Despite these challenges, India remains one of the fastest-growing major economies. The government’s strategies and fiscal policies for sustaining this growth will be under the spotlight in the Budget, particularly in light of weak consumption data and weaker-than-expected GDP numbers.

Key Traditions: The Halwa Ceremony and Budget Session

An important tradition preceding the Budget presentation is the ‘Halwa Ceremony’. This year, the event took place on January 24, marking the beginning of the printing process for the budget documents. The ceremony is a symbolic gesture to kick-start the preparations for the Union Budget and signifies the lockdown at the Ministry of Finance, where officials involved in budget preparation are not allowed to leave the compound until the documents are presented in Parliament.

The Budget session of Parliament is scheduled to begin on January 31 and will run until April 4, 2025, with a break from February 14 to March 10. On January 31, President Droupadi Murmu will address the joint sitting of both Houses of Parliament, outlining the government’s priorities for the upcoming year. The Union Budget will then be presented by Finance Minister Nirmala Sitharaman on February 1, with a speech detailing fiscal policies, revenue, expenditure proposals, and taxation reforms.

The Road Ahead: Scrutiny and Implementation

Once presented, the Union Budget will undergo detailed debate and discussions in Parliament, with lawmakers examining its provisions and proposing amendments. After approval by both Houses, the Budget will set in motion the implementation of the government’s fiscal roadmap for 2025-26. Key measures outlined in the Budget will be vital in shaping India’s economic trajectory, particularly in the face of global uncertainties and domestic growth concerns.

For Finance Minister Nirmala Sitharaman, this will be her seventh presentation of the Union Budget, surpassing the record set by former Prime Minister Morarji Desai, who presented five full budgets and one interim budget. The Budget 2025 will also be delivered in a paperless format, continuing the digital tradition of recent years.

As the nation looks ahead to the Union Budget, all eyes will be on the Economic Survey for clues about the government’s fiscal priorities and its vision for India’s economic future. The next few days will be crucial as the Survey and Budget presentations unfold, offering a glimpse into the economic direction for India in 2025-26.

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Finance Minister Nirmala Sitharaman will lead the ceremony, with Minister of State Pankaj Chaudhary and other senior officials from the Finance Ministry in attendance. The ceremony is attended by officers and staff involved in the exhaustive process of budget preparation, compiling, and finalization.

The Halwa ceremony holds deep significance in Indian government practices. The event sees the preparation of the sweet dish Halwa in a large ‘kadhai’ at the North Block, where the Finance Minister ceremoniously stirs the mixture. As part of the tradition, the minister serves the Halwa to everyone participating in the budget-making process, honoring their dedication and hard work.

The event also marks the commencement of the “lock-in” period for officials working on the budget. During this time, the Finance Ministry is essentially under lockdown, with officials not permitted to leave the ministry compound until the budget is formally presented in Parliament. This security measure ensures confidentiality during the crucial stages of finalizing the budget documents. The printing of the Union Budget takes place in the basement of the North Block, a practice that has been in place since 1980.

The Budget session of Parliament will begin on January 31, with the Union Budget scheduled for presentation on February 1. The session will run until April 4, with an inter-session break between February 14 and March 10. This year’s budget presentation will be Finance Minister Nirmala Sitharaman’s seventh, making her the longest-serving Finance Minister in terms of budget presentations. She has surpassed the previous record set by former Prime Minister Morarji Desai, who presented five annual budgets and one interim budget between 1959 and 1964.

This year’s budget, like its predecessors, will be delivered in a paperless format, and much anticipation surrounds the key announcements, particularly as the country grapples with weaker-than-expected GDP growth. The Indian economy grew by just 5.4% in the July-September quarter of 2024-25, falling short of the Reserve Bank of India’s forecast of 7%. As a result, the RBI has revised India’s growth forecast for 2024-25 down to 6.6% from an earlier estimate of 7.2%.

The Economic Survey, tabled earlier this year, projected India’s GDP growth for 2024-25 at 6.5-7%, acknowledging that expectations were higher due to recent slower growth. Despite the slowdown, India remains one of the fastest-growing major economies, having recorded an impressive 8.2% GDP growth for the fiscal year 2023-24.

As the countdown to the Budget presentation continues, all eyes are on the upcoming announcements, which are expected to outline the government’s economic vision and guidance for the remainder of the Modi 3.0 tenure. The 2025 Budget is expected to tackle current economic challenges and set the stage for future growth amidst a backdrop of weaker consumption and economic performance.

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The survey, which covered a sample of 300 firms across various industries, also highlighted a continued focus on job creation, with 97% of firms indicating that they plan to increase employment over the next two fiscal years. The findings signal a strong recovery and growth trajectory for India, even amid the challenges posed by global geopolitical tensions and disruptions in supply chains.

Chandrajit Banerjee, Director General of CII, emphasized that the anticipated uptick in private-sector investments and the growing employment opportunities align with India’s broader economic goals. “With the two critical drivers of growth—private investments and employment—looking positive, we feel confident that the overall growth is likely to remain stable at around 6.4-6.7 percent this year, with a possible rise to 7.0 percent in FY’26,” Banerjee stated.

The CII survey, which is part of a larger initiative to track the progress of private-sector investments, employment, and wage growth, has provided promising results. As part of its ongoing study, the CII expects to complete the survey for 500 firms by the first week of February.

Private Investments on the Rise

Despite the uncertain global economic climate, with geopolitical tensions and disruptions in supply chains, 75% of the respondents in the CII survey expressed confidence in the Indian economy’s potential to attract private investment. This optimism is largely attributed to the government’s effective economic policies, which have focused on public capital expenditure (capex) as a means to stimulate growth. As a result, India has managed to stand out as a key player in the global economy.

The significant investment plans for FY’26 further demonstrate the confidence within the private sector, with companies across all industry sizes—large, medium, and small—reporting strong intentions to boost their capital expenditures. This increase in investment is expected to have a ripple effect on the economy, generating higher demand, stimulating production, and enhancing infrastructure development.

Employment and Wage Growth: Positive Trends

Employment generation has emerged as a key focus in India’s policy discussions, with job creation being a cornerstone of the nation’s vision for 2047, which envisions a “Viksit Bharat” (Developed India). According to the survey, an impressive 97% of companies indicated plans to increase their workforce in both FY 2024-25 and FY 2025-26. Of these firms, a majority (42-46%) expect to increase their workforce by 10-20% over the next two years, while around 31-36% anticipate growth of up to 10%.

The manufacturing and services sectors are expected to see the largest increases in direct employment, with projections ranging from 15-22%. Indirect employment is also expected to grow significantly, with firms in both sectors forecasting a 14% rise in employment in the near future.

The survey also revealed that companies are facing challenges in filling senior management and supervisory positions, with hiring times for these roles typically ranging from one to six months. This indicates the ongoing need for a skilled workforce at higher levels within the industry.

Wages: A Driver of Consumption

The survey also highlighted a positive trend in wage growth, which has a direct impact on personal consumption—a key factor in driving economic expansion. Around 40-45% of the firms surveyed reported an increase in wage growth for senior management, managerial, and regular workers in the range of 10-20% for FY’25, continuing the upward trend observed in FY’24.

This wage growth, coupled with employment increases and rising investments, bodes well for India’s consumption-driven economy, providing a solid foundation for continued economic stability.

A Bright Future Ahead

The interim results from CII’s survey, while not yet complete, paint a promising picture for India’s economic future. With robust plans for private-sector investments, widespread job creation, and wage growth, India is poised for a period of sustained economic growth. These trends align with the government’s vision of creating a developed nation by 2047, supported by strong private-sector engagement and a thriving job market.

As India navigates the challenges posed by the global economy, the optimism reflected in this survey offers a hopeful glimpse into the country’s long-term growth prospects, signaling a future marked by robust economic performance, employment opportunities, and a vibrant private sector.

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Key Foreign Investors in Indian Real Estate

Foreign investments were heavily dominated by three countries: Singapore, the United States, and Canada, collectively contributing over 25% of the total equity inflows. Among them, Singapore emerged as the largest contributor with a 36% share of the foreign equity investments in 2024. The US followed with a 29% share, while Canada accounted for 22%. Additionally, investments from the UAE saw a notable rise when compared to the previous year.

Despite the influx of foreign capital, domestic investments continued to be the leading driver of growth, making up 70% of the total equity investment in 2024.

Market Dynamics and Investment Trends

The Indian real estate market in 2024 was characterized by a renewed focus on capital deployment, especially in built-up assets and the acquisition of land and development sites. Developers were the dominant force in the capital inflows, attracting 44% of the total equity investments. Institutional players followed closely with a 36% share, while corporations, REITs (Real Estate Investment Trusts), and other categories contributed smaller shares of 11%, 4%, and 5%, respectively.

Looking ahead to 2025, CBRE forecasts that investment activity will maintain its upward trajectory. The market is expected to see increased investments in built-up office assets and a robust pipeline of residential development projects. Furthermore, the rapid growth of e-commerce and quick commerce is likely to drive significant investments into warehousing infrastructure.

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa at CBRE, commented, “We expect sustained momentum in investment activity, particularly in built-up office assets and residential development sites. The increasing focus on e-commerce and quick commerce is set to fuel strong growth in logistics and warehousing sectors, offering new opportunities for both developers and investors.”

Shifting Focus to Metros, Tier-I, and Tier-II Cities

India’s metros and tier-I cities will continue to dominate as the primary destinations for equity inflows. However, there is also a growing interest in tier-II cities, which are witnessing a surge in real estate development, driven by strong demand across multiple sectors. These include residential, mixed-use developments, industrial & logistics (I&L), retail, and hospitality.

Gaurav Kumar, Managing Director, Capital Markets and Land at CBRE India, stated, “We are poised to witness significant growth momentum in investment activity from both institutional investors and domestic developers. The surge in real estate development, combined with healthy demand for office, residential, mixed-use, and I&L spaces, is driving this trend. In addition, sectors such as retail and hospitality are expected to gain renewed attention as the market continues to evolve to meet changing consumer and business needs.”

In conclusion, the Indian real estate sector is poised for continued growth in 2025, driven by strong investment inflows, particularly in office, residential, and logistics spaces, as well as a growing interest in emerging locations. With a diversifying market landscape, developers and investors alike are finding new opportunities in this dynamic sector.

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In the second quarter of FY25, India’s CAD narrowed slightly to 1.2% of GDP from 1.3% in the same quarter of the previous year. The widening of the CAD is primarily attributed to a higher trade deficit, with India’s merchandise trade deficit rising to USD 75.3 billion in Q2 FY25, compared to USD 64.5 billion in Q2 FY24. This increase was driven mainly by higher non-oil imports, including a USD 5 billion year-on-year rise in gold imports.

On a positive note, India’s services sector emerged as a strong performer, with net services balance increasing to USD 44.5 billion in Q2 FY25, up from USD 39.9 billion in the same period last year. Exports from the software and business services sectors were particularly robust, while private remittances saw growth, reaching USD 29.3 billion. These factors have been instrumental in helping to contain the CAD.

In terms of capital flows, India recorded a surplus of USD 11.9 billion in the capital account in Q2 FY25, compared to USD 10.3 billion in Q2 FY24. A sharp surge in Foreign Portfolio Investment (FPI) inflows, which jumped to USD 19.9 billion from USD 4.9 billion in the previous year, played a key role in bolstering this surplus. Other contributors included non-resident Indian (NRI) deposits and External Commercial Borrowings (ECBs), which helped offset increased Foreign Direct Investment (FDI) outflows.

The balance of payments (BoP) saw a significant surplus of USD 18.6 billion in Q2 FY25, up from USD 2.5 billion in Q2 FY24, driven by strong capital inflows.

Despite concerns over sluggish FPI inflows in recent months and the pressure of a stronger US dollar on the Indian rupee, the report suggests that the rupee will likely trade within the range of 84-85.5/USD in the near term.

The surge in the trade deficit, particularly in November 2024, driven by gold imports, is expected to be a temporary phenomenon. However, the Bank of Baroda has raised concerns about potential risks, such as the possibility of protectionist trade policies under the incoming US administration.

Overall, while the CAD may experience temporary pressure due to higher imports, particularly of gold, resilient services exports and strong remittance inflows are expected to keep India’s CAD at manageable levels for FY25.

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India’s private sector experienced robust growth in December, registering its highest performance in four months. Both the manufacturing and services sectors saw accelerated growth, driven by a rise in new business inflows and increased job creation.

The HSBC Flash India Manufacturing PMI rose to 57.4 in December from 56.5 in November, signaling improved business conditions. Gains in production, new orders, and employment fueled the recovery, with a rise in domestic demand playing a pivotal role.

Meanwhile, the services sector continued to lead growth, reflected in the HSBC Flash India Services PMI Business Activity Index, which climbed to 60.8 in December, up from 58.4 in November. Service providers recorded a sharper increase in sales and backlogs, showcasing the sector’s resilience.

Private sector firms also expanded their workforce significantly in December, with job creation reaching a new survey peak. Employers added both permanent and temporary staff to meet the growing demand, and backlogs of work rose at the fastest pace since May 2024.

Ines Lam, Economist at HSBC, stated, “In this flash release, the small rise in the headline manufacturing PMI in December was mainly driven by gains in current production, new orders, and employment. The expansion in new domestic orders quickened, suggesting a pick-up in growth momentum in the economy.” Lam also noted that sustained increases in input costs have prompted manufacturers to continue raising selling prices. The output price index rose to its highest level since February 2013.

Demand for Indian goods and services experienced its sharpest increase since July, with both domestic and international orders contributing to growth. New export orders expanded at the fastest rate in five months, with the manufacturing sector outperforming services in export growth.

Business optimism strengthened for the second consecutive month, reaching its highest level since September 2023. Manufacturers and service providers alike expressed positive demand expectations, with stronger customer relations boosting their confidence.

Although cost pressures eased slightly from the 15-month high seen in September, input costs for items like food, freight, and labor continued to rise. Despite this, firms increased selling prices, though at a slower rate than November’s near 12-year high.

Manufacturers stepped up input purchases in December, benefiting from improved vendor performance. Pre-production inventories grew, while finished goods stocks contracted as companies utilized inventory to meet rising demand.

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