Why in News?
The Economic Survey 2025 has outlined critical economic trends and challenges, including geopolitical risks, climate change, and policy shifts, as India gears up for the Union Budget 2025-26. With GDP growth projected between 6.3% and 6.8%, the survey stresses the importance of infrastructure development, private investments, and energy transition to sustain economic progress. This topic holds significant relevance for CLAT Current Affairs, given its implications for Constitutional Law for CLAT and governance policies.
India’s GDP Growth Estimates and Economic Projections
First advance estimate: India’s GDP growth for FY 2024-25 is pegged at 6.4%, slightly below the pre-pandemic average.
Projected real GDP growth for FY 2025-26: Between 6.3% and 6.8% (Crisil projects 6.7% growth).
Nominal GDP growth: Stands at 9.7%, slightly below the budget’s assumption of 10.5%.
International growth forecasts:
IMF: 6.5%
World Bank: 6.7% (keeping India as the fastest-growing major economy).
Global Economic Risks and Their Impact on India
The US economy is projected to slow down to 2% growth in 2025.
China’s economic slowdown and Europe’s economic stagnation continue.
Geopolitical tensions:
The possibility of Donald Trump’s re-election and potential trade tariffs on India.
Russia-Ukraine conflict and Middle East instability, affecting global oil prices and supply chains.
Role of Investments in Economic Growth
Public and household investments have driven post-pandemic recovery, but private sector investment remains sluggish.
The Survey recommends:
Deregulation and fiscal consolidation to attract more private capital.
Competitive policies to prevent capital outflows, as global economies compete for investments.
Infrastructure and Capital Expenditure Challenges
Budget 2025-26 has reduced capital expenditure (capex) growth to 17.1%, compared to 28.2% in 2023-24.
Key concerns:
40% of central projects above ₹150 crore have exceeded their deadlines and budgets.
The government needs to prioritize “shovel-ready” projects and coordinate with states.
Inflation and Economic Stability
Retail inflation: Averaged at 4.4%, but food inflation remains high.
Repo rate: Maintained at 6.5% to control inflationary pressures.
Crude oil prices above $80 per barrel continue to pose risks.
The RBI remains cautious about interest rate cuts due to global uncertainties.
Climate Change and Economic Risks
Agriculture and industrial production face severe disruptions due to climate variability.
Unpredictable monsoons impact food prices and supply chains.
The Survey suggests adopting climate adaptation strategies to stabilize farm productivity.
Trade, Industrial Policy & Clean Energy Transition
The Survey calls for a long-term tariff policy to ensure trade predictability and strengthen manufacturing competitiveness.
India is now a leading solar component producer, reducing reliance on imports.
Strategic industrial policies should support domestic manufacturing of key technologies.
Ease of Doing Business and Regulatory Reforms
Simplifying:
Land acquisition laws
Tax regulations
Dispute resolution mechanisms
The Finance Ministry and Ministry of Jal Shakti are leading business-friendly reforms.
Budget Implications and Fiscal Strategy
Fiscal consolidation remains a top priority, balancing public spending and revenue generation.
Deficit reduction strategies:
Improving tax revenue collection
Reducing non-essential expenditures
Boosting private investment to drive sustainable growth.
Key Terms and Their Explanation
Capital Expenditure (Capex): Government spending on infrastructure, roads, and capital projects.
Fiscal Consolidation: Process of reducing government deficits and debt accumulation.
Inflation and Repo Rate:
Inflation: The rate at which prices of goods and services rise.
Repo Rate: The RBI’s lending rate to commercial banks.
Geopolitical Risks: Trade and economic uncertainties due to international political conflicts.
Clean Energy Transition: India’s shift from fossil fuels to renewable energy sources.
Conclusion
India’s economic outlook remains positive but is fraught with global risks and domestic inefficiencies. The Economic Survey 2025 stresses the need for:
Better infrastructure planning and execution
Greater private sector investment
Stronger climate resilience strategies
Balanced fiscal policies to sustain economic momentum
These developments are highly relevant for CLAT Current Affairs and Constitutional Law for CLAT, as they influence governance, law, and policy-making in India.
