Traditionally, the Economic Survey of the Government of India puts forward the official views and the documentary evidence of the context of the current year, against which the Union budget is presented the next day. Thus, the Economic Survey, 2024-25 presented yesterday generated quite a bit of expectation regarding the shape of things to come. From that standpoint, this year’s Economic Survey does a placid job by offering a rather vanilla view of the global and the Indian economy.

A number of global headwinds have been flagged in the report. With Germany experiencing economic contraction for two successive years, political uncertainty in France, and the slowing economy of the United Kingdom, Europe is facing quite a bit of political and economic uncertainties. Post-Covid, the Chinese economy is unable to produce its exuberant growth, reflecting its overcapacity and financial strains in the real estate sector. The recent experience of the weakening of the emerging market currencies can be attributed to the strength in the US dollar and the rethinking in the Federal Reserve about the path of policy rates in the United States of America. On the contrary, several stock markets worldwide continue to remain at elevated levels and appear to be somewhat unaffected by concerns regarding economic growth and earnings uncertainties. Elevated geopolitical risks due to ongoing conflicts continue to pose significant challenges to the global economic outlook. A notable omission in this menu of global uncertainties in the Economic Survey has been the mood swings and the policy chaos emanating from the new presidency of Donald Trump in the US.

Domestically, India’s real gross domestic product is estimated to grow by 6.4% in the financial year, 2024-25, reflecting the revival of rural demand. Growth in the first half of 2024-25 seemed to have been driven by agriculture and the service sector. Manufacturing growth, however, has moderated. Despite some deceleration in the inflationary trend during April-December 2024, monthly volatility in food prices and in a select few commodities have been responsible for consumer price inflation moving towards the upper side of the tolerance band of India’s inflation targeting regime. On the policy front, the Economic Survey has been quite complimentary of the fiscal discipline and the increasing trend in capital expenditure as a percentage of the total expenditure of the Union government. Admittedly, the Economic Survey avoided the debate on targeting Indian inflation in terms of headline vis-à-vis core (primarily negating the influence of food and fuel prices) and, thereby, avoided any guidance on the future path of monetary policy. On the external front, the Economic Survey attributed the entire responsibility of capital outflows and the pressure on the rupee to external factors.

The message of the Economic Survey appears to be this: while the Indian economy is doing great, there is considerable uncertainty given the presence of global headwinds. Does the rhetoric of ‘locally fine but globally problematic’ reflect the existing economic reality? The answer should be evident in the near future.