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India to remain fastest growing economy as strong fundamentals push speedy rebound: FM
- The Indian economy is on a path of speedy rebound and will retain the tag of the fastest growing economy on account of strong economic fundamentals and the measures taken by the government, finance minister Nirmala Sitharaman said.
New Delhi: India is on course to making a speedy rebound and to retaining the tag of the fastest growing economy on account of its strong fundamentals and measures taken by the government, finance minister Nirmala Sitharaman told Parliament on Tuesday.
Replying to the debate on budget proposals for 2025-26 in the Lok Sabha, Sitharaman indicated that consumption boost is evident in the economy as provided by a 7.2% growth rate in private final consumption expenditure in FY25, driven by good demand. This, the finance minister said, has already taken consumption expenditure to 61.8% of nominal GDP, which is the highest since 2002-03.
“In the three years prior to 2024-25, the country’s GDP averaged around 8%. Only in two out of last 12 quarters, the growth has touched 5.4% or remained below it. I want to inform members, on account of strong economic foundation, a speedy rebound is happening and we shall take measures which will, going forward, help in keeping our economy growing the fastest as in the last few years and continue to remain the fastest growing economy,” Sitharaman said.
She said that the Union budget for 2026 is focusing on promoting agriculture, MSMEs, investments, exports, rural prosperity, and employment-led development.
On Capex
The finance minister said that the government is prioritizing capital expenditure, with the effective capital expenditure projected at ₹15.48 trillion or 4.3% of GDP in 2025-26.
In addition, the government will allocate nearly all of its borrowing for 2025-26 towards financing capital expenditure. An indicator of this is the FY26 fiscal deficit target of 4.4% with effective capital expenditure pegged at 4.3% of GDP.
"This indicates that almost the entire borrowed amount (about 99%) is utilized for capital expenditure. The borrowings are not directed towards revenue or committed expenditures," Sitharaman said replying to questions raised by members.
On Food Inflation
The finance minister told the Lok Sabha that food inflation has been moderated, even as the budget was presented amid economic uncertainty. “Inflation management receives the highest priority of this government. Overall, retail inflation is within the notified tolerance band of 2-6%.”
On the Indian Rupee
On the weakening of the rupee against the US dollar, the minister said that the rupee's performance against various other global currencies has been far better even as various global and domestic factors influence the value of the domestic currency.
The Indian rupee depreciated 3.3% against the dollar between October 2024 and January 2025, but the decline has been lower than that in some of its Asian peers.
The South Korean Won and Indonesian Rupiah depreciated by 8.1% and 6.9%, respectively, in this period. Further, all G-10 currencies also depreciated by more than 6%, with the Euro and British pounds sliding 6.7% and 7.2%, respectively, in this period.
Transfers to states
Sitharaman said there has been no cut in transfers to states, and an amount of ₹25.01 trillion will be transferred in FY'26, up from ₹13.44 trillion in 2020-21.
She also countered the Opposition charge that fiscal consolidation has come by way of lower allocations for social sectors.
Also read | Centre to tighten reform criteria for states seeking 50-year interest-free capex loans: Ajay Seth
The sectoral outlays in the year 2025-26 include agriculture which gets ₹1.71 trillion, rural development ( ₹2.67 trillion), urban development and transport ( ₹6.45 trillion), health and education ( ₹2.27 trillion), and defence (which excludes defence pension, ₹4.92 trillion). “I just want to highlight the fact that money is not being denied to any of the capital expenditure accounts," Sitharaman said.
On Employment
The finance minister also dismissed Opposition charges of India facing jobless growth, suggesting that the unemployment rate has almost halved from 6% 2017-18 to 3.2% in 2023-24.
“I want to highlight the fact that according to the 23-24 annual periodic labour force survey, labour force participation rate has increased from 49.8% in 2017-18 to 60% in 2023-24 reflecting a rise of about 10.3 percentage points. Worker- population ratio has also increased from 46.8% in 2017-18, to 58.2% in 2023-24 reflecting a rise of 11.4 percentage points. Moreover, through Rozgar Melas, over 9.25 lakh appointment letters have been issued for central government jobs in 14 editions, which have been held till date from october 2022,” she said.
Sitharaman said that amid measures to boost growth in the economy in the budget, the government has not lost sight of fiscal consolidation and aims to cut the centre’s debt-to-GDP ratio to around 50% level by 2030-31.
This has already fallen to around 56% from 61.4% in the covid year FY21.
“The centre’s debt is largely domestic, so downside risk is limited. The external debt of the centre is not big,” the FM said.
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Business NewsEconomyIndia to remain fastest growing economy as strong fundamentals push speedy rebound: FM
First Published:11 Feb 2025, 09:33 PM IST
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