Economic Survey 2024-25: Growth Projections, AI’s Impact on Jobs, and Infrastructure Focus

India’s Growth Outlook for FY26: 6.3-6.8% Amid Global Challenges

The Economic Survey 2024-25, presented in Parliament on January 31, projects India’s economic growth for FY26 to be in the range of 6.3% to 6.8%. This projection is in line with the International Monetary Fund’s estimate of 6.5%, though slightly lower than the 6.7% forecasted by the World Bank. As India faces global uncertainties, these figures reflect a cautious yet optimistic outlook for the nation’s economic trajectory.

Highlights from the Survey:

1. Economic Growth and Foreign Investment:
   • The gross Foreign Direct Investment (FDI) inflows have witnessed a revival, increasing by 17.9% in FY25, rising from $47.2 billion to $55.6 billion in the first eight months of FY25.
   • Exports, including both merchandise and services, have grown at 6% year-on-year (YoY) in the first nine months of FY25, demonstrating resilience in the face of global economic challenges. The services sector has particularly shone with an 11.6% growth.
2. AI-Induced Job Displacement:
   • A major concern highlighted in the survey is the impact of Artificial Intelligence (AI) on the labour market. AI is predicted to surpass human performance in critical decision-making in fields such as healthcare, education, and business, leading to potential mass displacement in middle- and lower-wage jobs.
   • India faces the challenge of balancing job creation with the advancements in automation. The survey emphasizes the need for both private sector involvement and public policy to tackle these disruptions.
3. Infrastructure Development and Capital Expenditure:
   • The government’s focus on infrastructure development has been consistent, with capital expenditure (Capex) in key sectors like railways, roads, and ports growing by 38.8% from FY20 to FY24. Notably, 5,853 km of national highways were constructed between April and December 2024.
   • PPP models (Public-Private Partnerships) are being actively pursued to boost infrastructure projects, signaling a stronger role for the private sector in enhancing national infrastructure.
4. Inflation and Fiscal Policies:
   • India has managed to reduce inflation from 5.4% in FY24 to 4.9% during April-December 2024. This reduction is attributed to government interventions such as strengthening buffer stocks for food items and easing import regulations.
   • Looking ahead, the Reserve Bank of India and International Monetary Fund (IMF) project inflation to align with the target of around 4% by FY26.
5. Focus on Renewable Energy and Climate Change:
   • The energy transition remains a challenge, with the thermal power sector playing a crucial role in India’s energy mix due to the limitations of renewable energy technology at scale. The need for efficient coal utilization and the use of super-critical and ultra-super-critical technologies is emphasized to reduce emissions.
6. Mental Health and Economic Well-being:
   • The survey acknowledges the growing issue of mental health as an economic concern, citing its increasing impact on productivity and well-being. Mental health challenges are influenced by factors such as workplace culture and lifestyle and are expected to have long-term economic implications.

Sectoral Insights and Emerging Trends:

• Technology and Digital Economy:
  • The tech sector continues to be a major growth engine, with tech exports reaching $200 billion, reflecting a 3.3% growth. The domestic market for tech is projected to grow by 5.9%, reaching over $54 billion by FY24.
  • The number of Global Capability Centers (GCCs) in India has grown from 1,430 in FY19 to over 1,700 in FY24, employing nearly 1.9 million professionals.
• Telecom Advancements:
  • India’s telecom sector has witnessed significant progress with the rollout of 5G services, now available in 779 districts across the country. More than 4.6 lakh 5G base stations have been installed, enhancing telecommunications infrastructure nationwide.
• Job Creation and Future Workforce:
  • To meet the growing workforce demand, India will need to create an average of 78.5 lakh jobs annually in the non-farm sector by 2030. This challenge is further compounded by automation risks in the IT sector, where low-value-added roles are highly susceptible to replacement by technology.
  • The gig economy is projected to expand significantly, with the gig workforce expected to reach 23.5 crore by 2029-30, representing 6.7% of the non-agricultural workforce.

Conclusion and Forward-Looking Strategy

The Economic Survey 2024-25 outlines a path toward sustained growth amid technological disruptions and global uncertainties. The focus on private sector innovation, public-private partnerships, and climate resilience suggests a balanced approach to India’s economic future. While challenges like AI-driven job displacement and inflation management remain, the economic outlook remains cautiously optimistic, supported by solid growth in exports, infrastructure development, and digital sector advancements.