State of the Economy: Getting Back Into the Fast Lane | Economic Survey & Government Reports - UPSC PDF Download

 Page 1


1
01
STATE OF THE ECONOMY: 
GETTING BACK INTO THE 
FAST LANE
The global economy exhibited steady yet uneven growth across regions in 2024. 
A notable trend was the slowdown in global manufacturing, especially in Europe 
and parts of Asia, due to supply chain disruptions and weak external demand. 
In contrast, the services sector performed better, supporting growth in many 
economies. Inflationary pressures eased in most economies. However, services 
inflation has remained persistent. Although commodity prices have stabilised, 
the risk of synchronised price increases persists. With growth varying across 
economies and last-mile disinflation proving sticky, central banks may chart 
varying paths of monetary easing. This will lead to uncertainty over future 
policy rates and inflation trajectories. This apart, geopolitical tensions, ongoing 
conflicts, and trade policy risks continue to pose significant challenges to global 
economic stability.
In this global context, India displayed steady economic growth. As per the 
first advance estimates of national accounts, India’s real GDP is estimated to 
grow by 6.4 per cent in FY25. Growth in the first half of FY25 was supported by 
agriculture and services, with rural demand improving on the back of record 
Kharif production and favourable agricultural conditions. The manufacturing 
sector faced pressures due to weak global demand and domestic seasonal 
conditions. Private consumption remained stable, reflecting steady domestic 
demand. Fiscal discipline and strong external balance supported by a services 
trade surplus and healthy remittance growth contributed to macroeconomic 
stability. Together, these factors provided a solid foundation for sustained 
growth amid external uncertainties.
Looking ahead, India’s economic prospects for FY26 are balanced. Headwinds 
to growth include elevated geopolitical and trade uncertainties and possible 
commodity price shocks. Domestically, the translation of order books of 
private capital goods sector into sustained investment pick-up, improvements 
in consumer confidence, and corporate wage pick-up will be key to promoting 
growth. Rural demand backed by a rebound in agricultural production, an 
anticipated easing of food inflation and a stable macro-economic environment 
provide an upside to near-term growth. Overall, India will need to improve 
its global competitiveness through grassroots-level structural reforms and 
deregulation to reinforce its medium-term growth potential.
Page 2


1
01
STATE OF THE ECONOMY: 
GETTING BACK INTO THE 
FAST LANE
The global economy exhibited steady yet uneven growth across regions in 2024. 
A notable trend was the slowdown in global manufacturing, especially in Europe 
and parts of Asia, due to supply chain disruptions and weak external demand. 
In contrast, the services sector performed better, supporting growth in many 
economies. Inflationary pressures eased in most economies. However, services 
inflation has remained persistent. Although commodity prices have stabilised, 
the risk of synchronised price increases persists. With growth varying across 
economies and last-mile disinflation proving sticky, central banks may chart 
varying paths of monetary easing. This will lead to uncertainty over future 
policy rates and inflation trajectories. This apart, geopolitical tensions, ongoing 
conflicts, and trade policy risks continue to pose significant challenges to global 
economic stability.
In this global context, India displayed steady economic growth. As per the 
first advance estimates of national accounts, India’s real GDP is estimated to 
grow by 6.4 per cent in FY25. Growth in the first half of FY25 was supported by 
agriculture and services, with rural demand improving on the back of record 
Kharif production and favourable agricultural conditions. The manufacturing 
sector faced pressures due to weak global demand and domestic seasonal 
conditions. Private consumption remained stable, reflecting steady domestic 
demand. Fiscal discipline and strong external balance supported by a services 
trade surplus and healthy remittance growth contributed to macroeconomic 
stability. Together, these factors provided a solid foundation for sustained 
growth amid external uncertainties.
Looking ahead, India’s economic prospects for FY26 are balanced. Headwinds 
to growth include elevated geopolitical and trade uncertainties and possible 
commodity price shocks. Domestically, the translation of order books of 
private capital goods sector into sustained investment pick-up, improvements 
in consumer confidence, and corporate wage pick-up will be key to promoting 
growth. Rural demand backed by a rebound in agricultural production, an 
anticipated easing of food inflation and a stable macro-economic environment 
provide an upside to near-term growth. Overall, India will need to improve 
its global competitiveness through grassroots-level structural reforms and 
deregulation to reinforce its medium-term growth potential.
Economic Survey 2024-25
2
INTRODUCTION
1.1 Global economic conditions are shaped by changing growth dynamics, fluctuating 
commodity prices, and evolving monetary policies, which influence domestic inflation, 
trade balances, and capital flows. At present, this interconnectedness is complicated by 
unusual levels of geopolitical tensions, supply chain disruptions, and climate-related 
shocks. Against this background, this chapter is organised broadly into four sections. 
The first section outlines the global economic scenario comprehensively, highlighting 
growth and inflation trends, policy stances, and key emerging risks and uncertainties. 
The second section focuses on the domestic macroeconomic situation, examining 
developments from the demand and supply sides. The third section delves into the 
emerging trends in public finances, inflation, external sector, financial markets and 
employment. The concluding section presents the prospects and outlook for growth in 
the presence of global headwinds while capitalising on domestic growth drivers.
GLOBAL ECONOMIC SCENARIO 
Steady global growth and varied regional dynamics
1.2 Globally, 2024 has been an eventful year. The year witnessed unprecedented 
electoral activity on the political front, with more than half of the global population 
voting in major elections across countries. Meanwhile, adverse developments like the 
Russia-Ukraine conflict and the Israel-Hamas conflict increased regional instability. 
These events impacted energy and food security, leading to higher prices and rising 
inflation. Cyberattacks also became more frequent and severe, with growing human 
and financial consequences due to the increasing digitisation of critical infrastructure.
1
  Geopolitical tensions, have reshaped global trade. Geopolitical risks and policy 
uncertainty, especially around trade policies, have also contributed to increased 
volatility in global financial markets.
2
1.3 Nonetheless, global economic growth has remained fairly moderate. The global 
economy grew by 3.3 per cent in 2023. The International Monetary Fund (IMF) has 
projected growth of 3.2 per cent and 3.3 per cent for 2024 and 2025, respectively. Over 
the next five years, global growth is expected to average around 3.2 per cent, which is 
modest by historical standards. While the overall global outlook remains steady, growth 
varies across different regions.
1  S&P Global. (n.d.). Geopolitical risk. S&P Global. https://tinyurl.com/2yrnnmsp.
2 Reserve Bank of India. (2024). Press release: Minutes of the Monetary Policy Committee Meeting, December 4 
to 6, 2024. https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=59347.
Page 3


1
01
STATE OF THE ECONOMY: 
GETTING BACK INTO THE 
FAST LANE
The global economy exhibited steady yet uneven growth across regions in 2024. 
A notable trend was the slowdown in global manufacturing, especially in Europe 
and parts of Asia, due to supply chain disruptions and weak external demand. 
In contrast, the services sector performed better, supporting growth in many 
economies. Inflationary pressures eased in most economies. However, services 
inflation has remained persistent. Although commodity prices have stabilised, 
the risk of synchronised price increases persists. With growth varying across 
economies and last-mile disinflation proving sticky, central banks may chart 
varying paths of monetary easing. This will lead to uncertainty over future 
policy rates and inflation trajectories. This apart, geopolitical tensions, ongoing 
conflicts, and trade policy risks continue to pose significant challenges to global 
economic stability.
In this global context, India displayed steady economic growth. As per the 
first advance estimates of national accounts, India’s real GDP is estimated to 
grow by 6.4 per cent in FY25. Growth in the first half of FY25 was supported by 
agriculture and services, with rural demand improving on the back of record 
Kharif production and favourable agricultural conditions. The manufacturing 
sector faced pressures due to weak global demand and domestic seasonal 
conditions. Private consumption remained stable, reflecting steady domestic 
demand. Fiscal discipline and strong external balance supported by a services 
trade surplus and healthy remittance growth contributed to macroeconomic 
stability. Together, these factors provided a solid foundation for sustained 
growth amid external uncertainties.
Looking ahead, India’s economic prospects for FY26 are balanced. Headwinds 
to growth include elevated geopolitical and trade uncertainties and possible 
commodity price shocks. Domestically, the translation of order books of 
private capital goods sector into sustained investment pick-up, improvements 
in consumer confidence, and corporate wage pick-up will be key to promoting 
growth. Rural demand backed by a rebound in agricultural production, an 
anticipated easing of food inflation and a stable macro-economic environment 
provide an upside to near-term growth. Overall, India will need to improve 
its global competitiveness through grassroots-level structural reforms and 
deregulation to reinforce its medium-term growth potential.
Economic Survey 2024-25
2
INTRODUCTION
1.1 Global economic conditions are shaped by changing growth dynamics, fluctuating 
commodity prices, and evolving monetary policies, which influence domestic inflation, 
trade balances, and capital flows. At present, this interconnectedness is complicated by 
unusual levels of geopolitical tensions, supply chain disruptions, and climate-related 
shocks. Against this background, this chapter is organised broadly into four sections. 
The first section outlines the global economic scenario comprehensively, highlighting 
growth and inflation trends, policy stances, and key emerging risks and uncertainties. 
The second section focuses on the domestic macroeconomic situation, examining 
developments from the demand and supply sides. The third section delves into the 
emerging trends in public finances, inflation, external sector, financial markets and 
employment. The concluding section presents the prospects and outlook for growth in 
the presence of global headwinds while capitalising on domestic growth drivers.
GLOBAL ECONOMIC SCENARIO 
Steady global growth and varied regional dynamics
1.2 Globally, 2024 has been an eventful year. The year witnessed unprecedented 
electoral activity on the political front, with more than half of the global population 
voting in major elections across countries. Meanwhile, adverse developments like the 
Russia-Ukraine conflict and the Israel-Hamas conflict increased regional instability. 
These events impacted energy and food security, leading to higher prices and rising 
inflation. Cyberattacks also became more frequent and severe, with growing human 
and financial consequences due to the increasing digitisation of critical infrastructure.
1
  Geopolitical tensions, have reshaped global trade. Geopolitical risks and policy 
uncertainty, especially around trade policies, have also contributed to increased 
volatility in global financial markets.
2
1.3 Nonetheless, global economic growth has remained fairly moderate. The global 
economy grew by 3.3 per cent in 2023. The International Monetary Fund (IMF) has 
projected growth of 3.2 per cent and 3.3 per cent for 2024 and 2025, respectively. Over 
the next five years, global growth is expected to average around 3.2 per cent, which is 
modest by historical standards. While the overall global outlook remains steady, growth 
varies across different regions.
1  S&P Global. (n.d.). Geopolitical risk. S&P Global. https://tinyurl.com/2yrnnmsp.
2 Reserve Bank of India. (2024). Press release: Minutes of the Monetary Policy Committee Meeting, December 4 
to 6, 2024. https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=59347.
Page 4


1
01
STATE OF THE ECONOMY: 
GETTING BACK INTO THE 
FAST LANE
The global economy exhibited steady yet uneven growth across regions in 2024. 
A notable trend was the slowdown in global manufacturing, especially in Europe 
and parts of Asia, due to supply chain disruptions and weak external demand. 
In contrast, the services sector performed better, supporting growth in many 
economies. Inflationary pressures eased in most economies. However, services 
inflation has remained persistent. Although commodity prices have stabilised, 
the risk of synchronised price increases persists. With growth varying across 
economies and last-mile disinflation proving sticky, central banks may chart 
varying paths of monetary easing. This will lead to uncertainty over future 
policy rates and inflation trajectories. This apart, geopolitical tensions, ongoing 
conflicts, and trade policy risks continue to pose significant challenges to global 
economic stability.
In this global context, India displayed steady economic growth. As per the 
first advance estimates of national accounts, India’s real GDP is estimated to 
grow by 6.4 per cent in FY25. Growth in the first half of FY25 was supported by 
agriculture and services, with rural demand improving on the back of record 
Kharif production and favourable agricultural conditions. The manufacturing 
sector faced pressures due to weak global demand and domestic seasonal 
conditions. Private consumption remained stable, reflecting steady domestic 
demand. Fiscal discipline and strong external balance supported by a services 
trade surplus and healthy remittance growth contributed to macroeconomic 
stability. Together, these factors provided a solid foundation for sustained 
growth amid external uncertainties.
Looking ahead, India’s economic prospects for FY26 are balanced. Headwinds 
to growth include elevated geopolitical and trade uncertainties and possible 
commodity price shocks. Domestically, the translation of order books of 
private capital goods sector into sustained investment pick-up, improvements 
in consumer confidence, and corporate wage pick-up will be key to promoting 
growth. Rural demand backed by a rebound in agricultural production, an 
anticipated easing of food inflation and a stable macro-economic environment 
provide an upside to near-term growth. Overall, India will need to improve 
its global competitiveness through grassroots-level structural reforms and 
deregulation to reinforce its medium-term growth potential.
Economic Survey 2024-25
2
INTRODUCTION
1.1 Global economic conditions are shaped by changing growth dynamics, fluctuating 
commodity prices, and evolving monetary policies, which influence domestic inflation, 
trade balances, and capital flows. At present, this interconnectedness is complicated by 
unusual levels of geopolitical tensions, supply chain disruptions, and climate-related 
shocks. Against this background, this chapter is organised broadly into four sections. 
The first section outlines the global economic scenario comprehensively, highlighting 
growth and inflation trends, policy stances, and key emerging risks and uncertainties. 
The second section focuses on the domestic macroeconomic situation, examining 
developments from the demand and supply sides. The third section delves into the 
emerging trends in public finances, inflation, external sector, financial markets and 
employment. The concluding section presents the prospects and outlook for growth in 
the presence of global headwinds while capitalising on domestic growth drivers.
GLOBAL ECONOMIC SCENARIO 
Steady global growth and varied regional dynamics
1.2 Globally, 2024 has been an eventful year. The year witnessed unprecedented 
electoral activity on the political front, with more than half of the global population 
voting in major elections across countries. Meanwhile, adverse developments like the 
Russia-Ukraine conflict and the Israel-Hamas conflict increased regional instability. 
These events impacted energy and food security, leading to higher prices and rising 
inflation. Cyberattacks also became more frequent and severe, with growing human 
and financial consequences due to the increasing digitisation of critical infrastructure.
1
  Geopolitical tensions, have reshaped global trade. Geopolitical risks and policy 
uncertainty, especially around trade policies, have also contributed to increased 
volatility in global financial markets.
2
1.3 Nonetheless, global economic growth has remained fairly moderate. The global 
economy grew by 3.3 per cent in 2023. The International Monetary Fund (IMF) has 
projected growth of 3.2 per cent and 3.3 per cent for 2024 and 2025, respectively. Over 
the next five years, global growth is expected to average around 3.2 per cent, which is 
modest by historical standards. While the overall global outlook remains steady, growth 
varies across different regions.
1  S&P Global. (n.d.). Geopolitical risk. S&P Global. https://tinyurl.com/2yrnnmsp.
2 Reserve Bank of India. (2024). Press release: Minutes of the Monetary Policy Committee Meeting, December 4 
to 6, 2024. https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=59347.
Page 5


1
01
STATE OF THE ECONOMY: 
GETTING BACK INTO THE 
FAST LANE
The global economy exhibited steady yet uneven growth across regions in 2024. 
A notable trend was the slowdown in global manufacturing, especially in Europe 
and parts of Asia, due to supply chain disruptions and weak external demand. 
In contrast, the services sector performed better, supporting growth in many 
economies. Inflationary pressures eased in most economies. However, services 
inflation has remained persistent. Although commodity prices have stabilised, 
the risk of synchronised price increases persists. With growth varying across 
economies and last-mile disinflation proving sticky, central banks may chart 
varying paths of monetary easing. This will lead to uncertainty over future 
policy rates and inflation trajectories. This apart, geopolitical tensions, ongoing 
conflicts, and trade policy risks continue to pose significant challenges to global 
economic stability.
In this global context, India displayed steady economic growth. As per the 
first advance estimates of national accounts, India’s real GDP is estimated to 
grow by 6.4 per cent in FY25. Growth in the first half of FY25 was supported by 
agriculture and services, with rural demand improving on the back of record 
Kharif production and favourable agricultural conditions. The manufacturing 
sector faced pressures due to weak global demand and domestic seasonal 
conditions. Private consumption remained stable, reflecting steady domestic 
demand. Fiscal discipline and strong external balance supported by a services 
trade surplus and healthy remittance growth contributed to macroeconomic 
stability. Together, these factors provided a solid foundation for sustained 
growth amid external uncertainties.
Looking ahead, India’s economic prospects for FY26 are balanced. Headwinds 
to growth include elevated geopolitical and trade uncertainties and possible 
commodity price shocks. Domestically, the translation of order books of 
private capital goods sector into sustained investment pick-up, improvements 
in consumer confidence, and corporate wage pick-up will be key to promoting 
growth. Rural demand backed by a rebound in agricultural production, an 
anticipated easing of food inflation and a stable macro-economic environment 
provide an upside to near-term growth. Overall, India will need to improve 
its global competitiveness through grassroots-level structural reforms and 
deregulation to reinforce its medium-term growth potential.
Economic Survey 2024-25
2
INTRODUCTION
1.1 Global economic conditions are shaped by changing growth dynamics, fluctuating 
commodity prices, and evolving monetary policies, which influence domestic inflation, 
trade balances, and capital flows. At present, this interconnectedness is complicated by 
unusual levels of geopolitical tensions, supply chain disruptions, and climate-related 
shocks. Against this background, this chapter is organised broadly into four sections. 
The first section outlines the global economic scenario comprehensively, highlighting 
growth and inflation trends, policy stances, and key emerging risks and uncertainties. 
The second section focuses on the domestic macroeconomic situation, examining 
developments from the demand and supply sides. The third section delves into the 
emerging trends in public finances, inflation, external sector, financial markets and 
employment. The concluding section presents the prospects and outlook for growth in 
the presence of global headwinds while capitalising on domestic growth drivers.
GLOBAL ECONOMIC SCENARIO 
Steady global growth and varied regional dynamics
1.2 Globally, 2024 has been an eventful year. The year witnessed unprecedented 
electoral activity on the political front, with more than half of the global population 
voting in major elections across countries. Meanwhile, adverse developments like the 
Russia-Ukraine conflict and the Israel-Hamas conflict increased regional instability. 
These events impacted energy and food security, leading to higher prices and rising 
inflation. Cyberattacks also became more frequent and severe, with growing human 
and financial consequences due to the increasing digitisation of critical infrastructure.
1
  Geopolitical tensions, have reshaped global trade. Geopolitical risks and policy 
uncertainty, especially around trade policies, have also contributed to increased 
volatility in global financial markets.
2
1.3 Nonetheless, global economic growth has remained fairly moderate. The global 
economy grew by 3.3 per cent in 2023. The International Monetary Fund (IMF) has 
projected growth of 3.2 per cent and 3.3 per cent for 2024 and 2025, respectively. Over 
the next five years, global growth is expected to average around 3.2 per cent, which is 
modest by historical standards. While the overall global outlook remains steady, growth 
varies across different regions.
1  S&P Global. (n.d.). Geopolitical risk. S&P Global. https://tinyurl.com/2yrnnmsp.
2 Reserve Bank of India. (2024). Press release: Minutes of the Monetary Policy Committee Meeting, December 4 
to 6, 2024. https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=59347.