
MUMBAI: The economic survey has presented a tepid set of marco numbers, projecting real GDP growth to be 6.3-6.8% for the next fiscal, citing the increasing pressure on the manufacturing sector due to weak global demand and seasonal domestic conditions. The economy is seen printing in a 6.4% growth in the current fiscal, which is close to the decadal average.
"Though the macro fundamentals remain robust with a strong external account, calibrated fiscal consolidation and stable private consumption, balancing it with the weak global demand and seasonal domestic factors we expect that the growth in FY26 would be between 6.3 and 6.8%," said the Economic Survey tabled by to Parliament by finance minister Nirmala Sitharaman on Friday.
Interestingly, the Survey has skipped a fiscal deficit for this fiscal or the next and it speaks up to FY24 only when the actual deficit printed in at 5.6% of GDP and the budget had pegged it at 4.9% for this fiscal. The survey further says the manufacturing sector faces pressures due to weak global demand and domestic seasonal conditions.
But it quickly also notes that this has been visible across the globe with manufacturing slowing especially in Europe and parts of Asia, due to supply chain disruptions and weak external demand.“ Private consumption remains stable, reflecting steady domestic demand.
Fiscal discipline and strong external balance supported by a services trade surplus and healthy remittances growth have contribute to macroeconomic stability so far. Together, these factors have provided a solid foundation for sustained growth amid external uncertainties," the survey said further exuding optimism.
The industrial sector grew 6% in first half, and is estimated to grow by 6.2% for the full year. The Survey also credits the government for all-round stability on inflation, fiscal health, and external sector balance safeguarded by services trade and record remittances.
The composite purchasing managers index has stayed in the expansion zone for the 14th consecutive in December. While the services sector continues to show strength, manufacturing has shown contraction.
Aggregate GVA has surpassed the pre-pandemic trend in Q1 of FY25 and now hovers above the trend in the first half of FY25 and according to the first advance estimates released earlier this month, the real GVA growth for FY25 is estimated to be 6.4%, after growing at 6.2% in H1. Of this, private final consumption expenditure is estimated to grow by 7.3% driven by a rebound in rural demand, taking its share in GDP from 60.3% in FY24 to 61.8% in FY25, making it the highest since FY03.
On the supply side, GVA is seen clipping at 6.4% in FY25 on the back of the agriculture sector rebounding to 3.8% and the industrial sector growing 6.2%. Strong growth rates in construction activities and electricity, gas, water supply and other utility services are expected to support industrial expansion.
Growth in the services sector is expected to remain robust at 7.2% driven by healthy activity in financial, real estate, professional services, public administration, defence, and other services. Sectorally speaking, the survey notes that construction has been a standout, gaining momentum since mid-FY21 and soaring around 15% above its pre-pandemic trend thanks to the robust infrastructure development and housing demand.
The utilities sector, including electricity, gas, water supply, and other services, reached the pre-pandemic level by the end of FY23 and has consistently stayed above these levels. But the biggest negative surprise has been the manufacturing sector, while steadily recovering, remains slightly below its pre-pandemic trajectory.
Keeping in mind the upsides and downsides to growth, the survey expects real GDP growth in FY26 to be between 6.3 and 6.8%.The survey notes that to realize the aspirations of a developed nation by 2047, it is important that medium-term growth outlook is assessed in the context of emerging global realities of geo-economic fragmentation, Chinese manufacturing prowess, and global dependency on China for energy transition efforts.
The survey concludes saying that looking ahead, our economic prospects for FY26 are balanced and the headwinds to growth include elevated geopolitical and trade uncertainties and possible commodity price shocks. Overall, we will need to improve our global competitiveness through grassroots-level structural reforms and deregulation to reinforce its medium-term growth potential.