State of the Economy: Getting Back Into the Fast Lane (2024-25) | Indian Economy for UPSC CSE PDF Download

 Page 1


CHAPTER
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


CHAPTER
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


CHAPTER
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.
State of the Economy
3
Chart I.1: Resilient global growth 
trends in 2024
Chart I.2: Steady growth outlook 
across country groups
 
3.3
3.1
3.2
0
1
2
3
4
5
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Mar-24
Jun-24
Sep-24
Per cent
World growth
 
3.3
1.7
4.4
3.2
1.7
4.2
3.3
1.9
4.2
World AEs EMDEs
Growth (%)
2023 2024 2025
Source: OECD Economic Outlook, Volume 2024  
Issue 2. 
Source: IMF WEO (January 2025)
Note: AEs- Advanced Economies, EMDEs- Emerging 
market and developing economies
1.4 Despite higher interest rates, advanced economies (AEs) witnessed stable growth 
in the first half of 2024. This was on account of moderating inflation and sustained 
employment and consumption.
3
 However, the growth outlook differs between the 
United States (US) and the Euro Area. Growth in the US is expected to remain strong 
at 2.8 per cent in 2024 and may decline slightly in 2025, reflecting a moderation in 
consumption and exports.
4
1.5 In the Euro area, growth is expected to improve from 0.4 per cent in 2023 to  
0.8 per cent in 2024 and further to 1.0 per cent in 2025 on the back of improving services 
activity. However, growth outcomes in Europe have been varied. Some countries like 
Spain, France, Poland, and the United Kingdom have benefitted from the strength of 
their services sector. Meanwhile, manufacturing-intensive countries like Germany and 
Austria are being weighed down by weak demand.
5
 Germany’s structural weaknesses, 
particularly in manufacturing (Chart I.3), have been noticeable, contributing to the 
slackness in Europe’s manufacturing. Political developments in France and Germany 
are also adding to policy uncertainty in Europe’s major economies.
1.6 The divergence of the growth trajectories of Europe and the US can also be seen in 
Citi Economic Surprises indices for these countries (Chart I.4). These indices compare 
actual data releases with analyst expectations. A value above zero indicates the data
3 Euromonitor International. (2024). Global economic outlook: Q3 2024. Euromonitor International. https://
www.euromonitor.com/article/global-economic-outlook-q3-2024.
4 International Monetary Fund. (2024). Regional economic outlook: Western Hemisphere, October 2024. https://
tinyurl.com/2ep72n66.
5 International Monetary Fund. (2024). Regional economic outlook: Europe, October 2024. https://tinyurl.
com/2s377x4z.
Page 4


CHAPTER
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.
State of the Economy
3
Chart I.1: Resilient global growth 
trends in 2024
Chart I.2: Steady growth outlook 
across country groups
 
3.3
3.1
3.2
0
1
2
3
4
5
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Mar-24
Jun-24
Sep-24
Per cent
World growth
 
3.3
1.7
4.4
3.2
1.7
4.2
3.3
1.9
4.2
World AEs EMDEs
Growth (%)
2023 2024 2025
Source: OECD Economic Outlook, Volume 2024  
Issue 2. 
Source: IMF WEO (January 2025)
Note: AEs- Advanced Economies, EMDEs- Emerging 
market and developing economies
1.4 Despite higher interest rates, advanced economies (AEs) witnessed stable growth 
in the first half of 2024. This was on account of moderating inflation and sustained 
employment and consumption.
3
 However, the growth outlook differs between the 
United States (US) and the Euro Area. Growth in the US is expected to remain strong 
at 2.8 per cent in 2024 and may decline slightly in 2025, reflecting a moderation in 
consumption and exports.
4
1.5 In the Euro area, growth is expected to improve from 0.4 per cent in 2023 to  
0.8 per cent in 2024 and further to 1.0 per cent in 2025 on the back of improving services 
activity. However, growth outcomes in Europe have been varied. Some countries like 
Spain, France, Poland, and the United Kingdom have benefitted from the strength of 
their services sector. Meanwhile, manufacturing-intensive countries like Germany and 
Austria are being weighed down by weak demand.
5
 Germany’s structural weaknesses, 
particularly in manufacturing (Chart I.3), have been noticeable, contributing to the 
slackness in Europe’s manufacturing. Political developments in France and Germany 
are also adding to policy uncertainty in Europe’s major economies.
1.6 The divergence of the growth trajectories of Europe and the US can also be seen in 
Citi Economic Surprises indices for these countries (Chart I.4). These indices compare 
actual data releases with analyst expectations. A value above zero indicates the data
3 Euromonitor International. (2024). Global economic outlook: Q3 2024. Euromonitor International. https://
www.euromonitor.com/article/global-economic-outlook-q3-2024.
4 International Monetary Fund. (2024). Regional economic outlook: Western Hemisphere, October 2024. https://
tinyurl.com/2ep72n66.
5 International Monetary Fund. (2024). Regional economic outlook: Europe, October 2024. https://tinyurl.
com/2s377x4z.
Economic Survey 2024-25
4
Chart I.3: Structural weakness in the 
German economy
Chart I.4: Citi Economic Surprise 
Indices indicating unexpected 
resilience of the US
 
 
-40
-20
0
20
40
60
75
85
95
105
115
125
Sep-2010
Sep-2012
Sep-2014
Sep-2016
Sep-2018
Sep-2020
Sep-2022
Sep-2024
Index
Gap from trend (RHS)
Real industrial production
(seasonally adjusted)
Trend (2010-2019)
 
 
-200
-150
-100
-50
0
50
100
150
Jan-2023
Mar-2023
May-2023
Jul-2023
Sep-2023
Nov-2023
Jan-2024
Mar-2024
May-2024
Jul-2024
Sep-2024
Nov-2024
Index
US
EU
Source: Bloomberg
was stronger than analyst expectations, while a negative value indicates weaker actual 
data compared to expectations. Between January 2023 and November 2024, data for 
the US economy continued to present more ‘positive’ surprises than the EU, compared 
to the analyst estimates. 
1.7 Within Asia, Japan's growth was hindered by domestic supply disruptions in the early 
part of the year, while China’s growth weakened after the first quarter, affected by sluggish 
private consumption and investment, alongside challenges in the real estate sector.
6
 
Services sector growth steady; manufacturing faces challenges
1.8 The global composite Purchasing Managers’ Index (PMI) has stayed in the 
expansion zone for the fourteenth month in a row (as of December 2024). The services 
sector continues to show strength while manufacturing PMI indicated contraction.
7
1.9 In 2024, the global manufacturing PMI started strong, moving into expansion for the 
first time since mid-2023 and remained so through the first half of the year. By July 2024, 
weaker conditions pushed the PMI back into contraction. Following four months of gradual 
declines, the global manufacturing sector stabilised in November with an index value of 
50.0, indicating no overall change in operating conditions.
8
 Output growth in consumer 
and intermediate goods offset a downturn in investment goods. Increased production was 
attributed to stabilising new order intakes and the clearance of backlogs of work.
6 International Monetary Fund. (2024,October 31). Regional economic outlook for Asia and the Pacific. October 
2024. https://tinyurl.com/ycka65ub.
7 S&P Global. (2025, January 6). Global growth accelerates as solid service sector expansion offsets manufacturing 
weakness. https://tinyurl.com/mr3pkjmh.
8 S & P Global. Global manufacturing PMI highlights. https://tinyurl.com/bddkyr27.
Page 5


CHAPTER
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.
State of the Economy
3
Chart I.1: Resilient global growth 
trends in 2024
Chart I.2: Steady growth outlook 
across country groups
 
3.3
3.1
3.2
0
1
2
3
4
5
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Mar-24
Jun-24
Sep-24
Per cent
World growth
 
3.3
1.7
4.4
3.2
1.7
4.2
3.3
1.9
4.2
World AEs EMDEs
Growth (%)
2023 2024 2025
Source: OECD Economic Outlook, Volume 2024  
Issue 2. 
Source: IMF WEO (January 2025)
Note: AEs- Advanced Economies, EMDEs- Emerging 
market and developing economies
1.4 Despite higher interest rates, advanced economies (AEs) witnessed stable growth 
in the first half of 2024. This was on account of moderating inflation and sustained 
employment and consumption.
3
 However, the growth outlook differs between the 
United States (US) and the Euro Area. Growth in the US is expected to remain strong 
at 2.8 per cent in 2024 and may decline slightly in 2025, reflecting a moderation in 
consumption and exports.
4
1.5 In the Euro area, growth is expected to improve from 0.4 per cent in 2023 to  
0.8 per cent in 2024 and further to 1.0 per cent in 2025 on the back of improving services 
activity. However, growth outcomes in Europe have been varied. Some countries like 
Spain, France, Poland, and the United Kingdom have benefitted from the strength of 
their services sector. Meanwhile, manufacturing-intensive countries like Germany and 
Austria are being weighed down by weak demand.
5
 Germany’s structural weaknesses, 
particularly in manufacturing (Chart I.3), have been noticeable, contributing to the 
slackness in Europe’s manufacturing. Political developments in France and Germany 
are also adding to policy uncertainty in Europe’s major economies.
1.6 The divergence of the growth trajectories of Europe and the US can also be seen in 
Citi Economic Surprises indices for these countries (Chart I.4). These indices compare 
actual data releases with analyst expectations. A value above zero indicates the data
3 Euromonitor International. (2024). Global economic outlook: Q3 2024. Euromonitor International. https://
www.euromonitor.com/article/global-economic-outlook-q3-2024.
4 International Monetary Fund. (2024). Regional economic outlook: Western Hemisphere, October 2024. https://
tinyurl.com/2ep72n66.
5 International Monetary Fund. (2024). Regional economic outlook: Europe, October 2024. https://tinyurl.
com/2s377x4z.
Economic Survey 2024-25
4
Chart I.3: Structural weakness in the 
German economy
Chart I.4: Citi Economic Surprise 
Indices indicating unexpected 
resilience of the US
 
 
-40
-20
0
20
40
60
75
85
95
105
115
125
Sep-2010
Sep-2012
Sep-2014
Sep-2016
Sep-2018
Sep-2020
Sep-2022
Sep-2024
Index
Gap from trend (RHS)
Real industrial production
(seasonally adjusted)
Trend (2010-2019)
 
 
-200
-150
-100
-50
0
50
100
150
Jan-2023
Mar-2023
May-2023
Jul-2023
Sep-2023
Nov-2023
Jan-2024
Mar-2024
May-2024
Jul-2024
Sep-2024
Nov-2024
Index
US
EU
Source: Bloomberg
was stronger than analyst expectations, while a negative value indicates weaker actual 
data compared to expectations. Between January 2023 and November 2024, data for 
the US economy continued to present more ‘positive’ surprises than the EU, compared 
to the analyst estimates. 
1.7 Within Asia, Japan's growth was hindered by domestic supply disruptions in the early 
part of the year, while China’s growth weakened after the first quarter, affected by sluggish 
private consumption and investment, alongside challenges in the real estate sector.
6
 
Services sector growth steady; manufacturing faces challenges
1.8 The global composite Purchasing Managers’ Index (PMI) has stayed in the 
expansion zone for the fourteenth month in a row (as of December 2024). The services 
sector continues to show strength while manufacturing PMI indicated contraction.
7
1.9 In 2024, the global manufacturing PMI started strong, moving into expansion for the 
first time since mid-2023 and remained so through the first half of the year. By July 2024, 
weaker conditions pushed the PMI back into contraction. Following four months of gradual 
declines, the global manufacturing sector stabilised in November with an index value of 
50.0, indicating no overall change in operating conditions.
8
 Output growth in consumer 
and intermediate goods offset a downturn in investment goods. Increased production was 
attributed to stabilising new order intakes and the clearance of backlogs of work.
6 International Monetary Fund. (2024,October 31). Regional economic outlook for Asia and the Pacific. October 
2024. https://tinyurl.com/ycka65ub.
7 S&P Global. (2025, January 6). Global growth accelerates as solid service sector expansion offsets manufacturing 
weakness. https://tinyurl.com/mr3pkjmh.
8 S & P Global. Global manufacturing PMI highlights. https://tinyurl.com/bddkyr27.
State of the Economy
5
Chart I.5: Global manufacturing stabilises in November 2024
 
50
44
46
48
50
52
54
56
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Jun-24
Jul-24
Aug-24
Sep-24
Oct-24
Nov-24
Dec-24
Index
 Global Manufacturing PMI Global Services PMI Global Composite PMI
Source: Bloomberg
1.10 Production trends varied widely across regions in December (Chart I.6 and I.7). 
Production rose in 13 of the 30 nations for which December PMI data were available. 
The Eurozone saw the steepest contractions, led by France, Germany, and Austria. 
North America showed mixed results, with Canada’s growth offset by declines in the US 
and Mexico. India reported the strongest expansion of output. The outlook for global 
manufacturing also remained subdued in December, with business sentiment dipping to 
a three-month low.
9
Chart I.6: PMI manufacturing in 
advanced economies
Chart I.7: PMI manufacturing in 
emerging market economies
 
40
45
50
55
60
Jan 2022
Jun 2022
Nov 2022
Apr 2023
Sep 2023
Feb 2024
Jul 2024
Dec 2024
Imdex
 Canada U.S.
 U.K. Japan
 European Union Global
 
40
45
50
55
60
Jan 2022
Jun 2022
Nov 2022
Apr 2023
Sep 2023
Feb 2024
Jul 2024
Dec 2024
Imdex
 Brazil Mexico
 China India
 Indonesia Emerging Markets
Source: Bloomberg
9 S&P Global. (2025, January 2). J.P.Morgan Global Manufacturing PMI: Global manufacturing contracts at end 
of 2024. https://tinyurl.com/yn3a2fnm.