India’s real GDP growth to be 6.5%-7% in 2024-’25, says Economic Survey

India’s real gross domestic product is expected to grow between 6.5% and 7% in the financial year 2024-’25, the government’s annual Economic Survey said on Monday.

The projection is lower than that of the Reserve Bank of India. In June, the central bank upgraded its forecast of the country’s real gross domestic product for 2024-’25 to 7.2% from 7% estimated a month earlier.

The real gross domestic product grew at 8.2% in the previous fiscal year, according to government data.

The survey, tabled by Finance Minister Nirmala Sitharaman in Parliament a day ahead of the Union Budget for 2024-’25, details the state of the country’s economy.

The document published by the Department of Economic Affairs said that domestic growth drivers had supported economic growth in the previous fiscal year despite uncertain global economic performance.

“A normal rainfall forecast by the India Meteorological Department and the satisfactory spread of the southwest monsoon thus far are likely to improve agriculture sector performance and support the revival of rural demand…” the survey said. “Structural reforms such as the GST [Goods and Services Tax] and the IBC [Insolvency and Bankruptcy Code] have also matured and are delivering envisaged results.”

The survey, supervised by Chief Economic Advisor V Anantha Nageswaran, also forecast that exports in services sector may improve.

The survey said that in the medium term, the economy can grow at a rate of 7% on a sustained basis “if we can build on the structural reforms undertaken over the last decade”.

Last week, the International Monetary Fund had also raised India’s Gross Domestic Product forecast for 2024-’25 by 0.2 basis points to 7%. A basis point is one-hundredth of a percentage point.

Participation of retail investors, derivatives trading

The Economic Survey also said that the increasing participation of retail investors in the equity markets warranted careful consideration.

It said there was serious concern about “overconfidence leading to speculation and the expectation of even greater returns, which might not align with the real market conditions”.

It also expressed caution about the participation of retail investors in derivatives trading.

“Derivatives trading holds the potential for outsized gains. Thus, it caters to humans’ gambling instincts and can augment income if profitable,” the document said. “These considerations are likely driving active retail participation in derivatives trading. However, globally, derivatives trading loses money for the investors, for the most part.”

The department of economic affairs said that raising investor awareness and financial education was essential to warn retail investors of the “low or negative expected returns from derivatives trading”.

“A significant stock correction could see losses that are more considerable for retail investors participating in capital markets through derivatives,” it added. “Investors’ behavioural response would be to feel ‘cheated’ by unseen more considerable forces. They may not return to capital markets for a long time. That is a loss to them and the economy.”