Economy of India / India's economy will run at rocket speed, just have to do this work

Economy of India: The Indian economy will grow at a rate of 6.5 percent in the next financial year (2025-26), the 'Economy Watch' report of the prestigious consulting firm EY has estimated. According to the report, a balanced fiscal strategy, which supports human capital development while maintaining financial prudence, will help increase the prospects of long-term growth.

View on economic growth projections

The March edition of EY Economy Watch has estimated India's real gross domestic product (GDP) growth rate to be 6.4 percent for the financial year 2024-25, while it has been estimated at 6.5 percent for the next financial year 2025-26. The report says that to maintain this growth, it will be necessary to make India's fiscal policy in line with the country's developed India mission.

Need to increase government expenditure

According to the revised National Accounts Account data released by the National Statistical Office (NSO), the real GDP growth rate for FY 2022-23 to 2024-25 is estimated at 7.6 per cent, 9.2 per cent and 6.5 per cent respectively. The third quarter growth of the current financial year 2024-25 is estimated at 6.2 per cent, which means that a growth rate of 7.6 per cent will be required in the fourth quarter to maintain an annual growth rate of 6.5 per cent.

According to the report, a growth of 9.9 per cent in private final consumption expenditure will be necessary to achieve this target. Such high growth has not been seen in recent years, so another measure could be to increase investment expenditure, in which the government's capital expenditure growth will play an important role.

Need to invest in education and health sector

Keeping in mind India's growing population and evolving economic structure, it will be necessary to invest more in education and health services. The EY India report suggests that India needs to gradually increase its government education and health spending over the next two decades to reach levels closer to those of high-income countries.

Given India's young population and growing workforce requirements, the government will need to increase spending on education from the current 4.6 per cent of GDP to 6.5 per cent by FY 2047-48. To ensure better access to healthcare and better health outcomes, government health expenditure will need to increase from 1.1 per cent in 2021 to 3.8 per cent by 2047-48.

Emphasis on jobs and human resource development

According to the report, for long-term economic growth, India will have to focus on improving the quality of the workforce as well as creating new jobs. Skill development programmes and innovation need to be promoted to generate new job opportunities. Additionally, government and private sector partnerships will also need to support startups and small enterprises.