Indian Economic Growth Rate, GDP and Government size
India's GDP growth for FY 2025-26 to be in the range of 6.3% to 6.8%. The total government expenditure for FY 2025-26 is ₹47.66 lakh crore (₹47.66 trillion). India's nominal GDP for FY 2025-26 is projected to be around ₹330 lakh crore (₹330 trillion). Central Government Expenditure: ~14.5% of GDP. Including expenditure of State Governments, the total Public Expenditure is around ~27-30% of GDP
Inflation Rate
As of December 2024, India's year-on-year retail inflation rate, measured by the Consumer Price Index (CPI), stood at 5.22%. The CPI is decreasing with 5.48% in November 2024 and 6.21% in October 2024. From April-December 2024, the average CPI inflation was 5.4%. This rate is above the Reserve Bank of India's (RBI) medium-term target of 4%. Government believes that the CPI would ease to 4.5% in 2026.
Policy in response to inflationary trend
In response to these inflationary trends, the RBI has continued to maintain the repo (repurchase rate - lending rate of interest by RBI) rate at 6.50% after an increase in 2023. However, it reduced the cash reserve ratio (CRR) by 50 basis points to 4%, injecting liquidity into the banking system to support economic growth. (repo rate increase reduces cash availability and hence reduces the inflation. Similarly, CRR increase reduces cash with banks and hence reduces the inflation - Economic growth increases with increase in cash availability - repo rate decrease and/or CRR reduction). On 7th February, the RBI decreased the Repo rate by 25 basis points to 6.25%. This is reduction in repo rate after 5 years and change in repo rate after 2 years. The reduction in repo rate is viewed as commitment of RBI to foster growth and its preparedness to manage inflation.
Debt
As of the fiscal year 2024-25, India's central government debt is estimated at 57.1% of the Gross Domestic Product (GDP). This ratio is projected to decline to 56.1% in 2025-26. The government has outlined a fiscal consolidation roadmap aiming to reduce the debt-to-GDP ratio to approximately 50% by March 31, 2031. In absolute terms, the national government debt reached approximately $2.14 trillion USD in September 2024 (Rs 160 lakh crores).
Unemployment rate
India's unemployment rate is at 7.8%. A slight increase from 7.7% in November 2024 (in three months). In absolute terms, the number of unemployed individuals rose from 34.7 million to 35.6 million during this period. The Economic Survey 2024-25 highlighted a significant improvement in employment over recent years. The unemployment rate decreased from 6% in 2017-18 to 3.2% in 2023-24, indicating progress in job creation. It's important to note that unemployment rates can vary between urban and rural areas. For instance, in the July-September 2024 quarter, the unemployment rate for individuals aged 15 and above in urban areas was 6.4%, down from 6.6% in the previous quarter. The unemployment rates mentioned here are reported by Government and Government approves agencies. However, there seems to be lack of clarity when numbers from different sources are compiled and compared. This appears to be mainly due to the change in the way the unemployment is calculated.
Income levels
The mean income is about 15K/month. The median income, representing the income that divides the population into equal half, is around ₹8,000 per month. The mode income, the most frequently occurring income in the population, is around ₹8,000 per month. The lower-middle-class segment had an average monthly income of approximately ₹33,000, with monthly expenses around ₹19,000.
Extend of Subsidies
Approximately ₹4.57 trillion (₹4.57 lakh crore) are allocated for major subsidies. Food Subsidy is about ₹2.03 trillion, Fertilizer Subsidy: Allocated ₹1.67 trillion, Rural Employment (MGNREGA): Allocated ₹860 billion. While food subsidy increased by 60 billion rs, the fertilizer subsidy decreased by 40 billion rs.
Regional Economy - Karnataka
Karnataka's economic contribution to India's GDP is significant. In the fiscal year 2024-25, Karnataka's Gross State Domestic Product (GSDP) is projected to be ₹28.09 lakh crore. Given India's projected nominal GDP of approximately ₹330 lakh crore for the same period, Karnataka's GSDP accounts for about 8.5% of the national GDP.
In terms of government expenditure, Karnataka's budget for 2024-25 estimates a total expenditure of ₹3.71 lakh crore. This represents approximately 1.1% of India's total GDP.
Good Governance
Good governance depends on resource management and corruption. India ranked 96 out of 180 countries in the Corruption Perceptions Index (CPI) for 2024 as its overall score dropped a point to 38, according to a Transparency International report released on Tuesday (February 11, 2025). According to Center of Media Studies, Overall poll expenditure is expected to reach a staggering Rs 1.35 lakh crore for 2024 Parliament elections. Govt expenditure 50lakh crore and GDP is 350lakh crore.
Pressure to mobilize resources to elections drive public corruption. Politicians will get an opportunity to access government resources and also influence the private entities to support them. According to one estimate, the extent of corruption in India could be could be around 20lakh crore. Corruption also reduces compliance to the rules and regulations causing inconvenience to the public in many ways.
