UPSC CURRENT AFFAIRS – 30th March 2025
India to grow at 6.5% in FY26: EY Report
Why in News?
According to the March 2025 edition of EY Economy Watch, the Indian economy is projected to grow at 6.4% in FY25 and 6.5% in FY26, supported by private consumption and government investment. The report underlines the need for a well-calibrated fiscal strategy that prioritizes human capital development, regional equity, and fiscal prudence, especially in light of India’s goal of becoming a Viksit Bharat by 2047.
Key Economic Estimates
- Real GDP Growth (as per NSO revised estimates):
- FY23: 7.6%
- FY24: 9.2%
- FY25: 6.5% (projected)
- FY26: 6.5% (EY projection)
- Q3 FY25 GDP growth: 6.2%
- Requires 7.6% growth in Q4 FY25 to achieve the 6.5% annual target.
- This would demand 9.9% growth in private final consumption expenditure (PFCE), which is seen as ambitious under current conditions.
Analysis: Challenges in Meeting Growth Targets
- Pressure on Private Consumption
- The EY report notes that a near 10% growth in consumption is difficult, given ongoing geopolitical pressures, inflation risks, and global economic uncertainty.
- Therefore, a more feasible route to achieving targets could be enhancing investment expenditure, particularly government-led capital spending.
- Role of Fiscal Policy
- Fiscal deficit may expand due to supplementary demands for grants, but this could be cushioned by higher nominal GDP, which keeps the deficit-to-GDP ratio manageable.
- A balanced approach to fiscal stimulus is needed to sustain growth while avoiding inflationary and debt-related risks.
Human Capital: Long-Term Growth Driver
- Need to Expand Education and Health Spending
- India needs to increase public spending on education and healthcare over the next two decades to fully leverage its demographic dividend.
|
Sector |
Current (% of GDP) |
Target by FY2048 |
|
Education |
4.6% |
6.5% |
|
Health |
1.1% |
3.8% |
-
- This is necessary to enhance productivity, employability, and human well-being, especially in low-income and demographically young states.
- Regional Equity through Equalisation Transfers
- The report recommends equalisation transfers to support fiscally weaker states in improving health and education access.
- These transfers are crucial to address inter-state disparities and ensure inclusive development.
Revenue Mobilisation Strategy
- The report emphasizes the need to raise India’s revenue-to-GDP ratio from 21% to 29% over time.
- This would enable the government to sustainably fund social sector investments without breaching fiscal prudence.
Demographics and Growth Cycle
- India’s changing age structure will increase the working-age population share.
- If supported by adequate investments in human capital and infrastructure, this can create a virtuous cycle of:
- Employment
- Savings
- Investment
- Growth
Conclusion
The EY report reaffirms India’s medium-term growth potential but also flags structural bottlenecks in consumption, fiscal capacity, and human capital. A phased, prudent fiscal strategy—focusing on education, health, and infrastructure, along with revenue mobilisation and regional equity mechanisms—will be key to sustaining momentum toward a Viksit Bharat. The real challenge lies not just in achieving 6.5% GDP growth, but in ensuring that growth is inclusive, resilient, and human development-oriented.
3rd UN conference on landlocked countries
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Issue of soapstone mining in Uttarakhand’s Bageshwar
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Groundwater Pollution in India – A Silent Public Health Emergency
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Universal banking- need and impact
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India’s “Goldilocks” Economy: A Critical Appraisal
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U.S.-India Trade Dispute: Trump’s 50% Tariffs and India’s Oil Imports from Russia
UPSC CURRENT AFFAIRS – 07th August 2025 Home / U.S.-India Trade Dispute: Trump’s 50% Tariffs and India’s Oil Imports from
Eco-Friendly Solution to Teak Pest Crisis: KFRI’s HpNPV Technology
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New Species of Non-Venomous Rain Snake Discovered in Mizoram
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