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Economy Watch

Economy Watch provides an in-depth review of salient developments in India’s macroeconomy and economic policy in a global context.
It has established itself as a thought leadership publication, providing valuable inputs for policymakers in the central and state governments, academicians, industry and businesses and other stakeholders.

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The team

Photographic portrait of D.K. Srivastava
D. K. Srivastava
EY India Chief Policy Advisor

Economy Watch was launched for public distribution soon after demonetization. The February 2025 issue marks its 100th edition.

It covers various macro-fiscal dimensions of the Indian economy including growth, inflation, government finances, external trade, monetary and financial sectors. It places India in a comparative economic framework using selected developed and developing countries.

Two innovative indices have been developed to capture changes in aggregate demand and macroeconomic imbalances in the Indian economy. The analysis in the Economy Watch is based on monthly, quarterly and annual data sourced from national and international sources.

Every month, a focused theme of contemporary economic importance is identified for a deep and insightful analysis which provides useful inputs and recommendations.

Key highlights for February 2025
  • Services PMI moderated to a 26-month low of 56.5 in January 2025, while manufacturing PMI increased to a six-month high of 57.7 during the month.
  • IIP growth fell to a three-month low of 3.2% in December 2024 from 5.0% in November 2024 due to moderation in the growth of manufacturing output. In 3QFY25, IIP growth was higher at 3.9% as compared to 2.7% in 2QFY25.
  • The RBI lowered the repo rate, for the first time since May 2020, by 25 basis points to 6.25% in its February 2025 monetary policy review.
  • CPI inflation eased to a five-month low of 4.3% in January 2025 as inflation in vegetables moderated, whereas core CPI inflation remained steady at 3.7% for the fourth successive month.
  • WPI inflation remained benign, easing marginally to 2.3% in January 2025 from 2.4% in December 2024, as a fall in inflation in vegetables was nearly fully offset by a falling pace of contraction in prices of crude and mineral oils accompanied by an increase in inflation in manufactured products.
  • According to the CGA, during the period April to December 2024, GoI’s gross tax revenue (GTR) showed a growth of 10.8%, with growth in direct taxes at 12.2% and that in indirect taxes at 7.4%.
  • GoI’s total expenditure grew by 5.8% during April-December FY25, with growth in capital expenditure at 1.7% and that in revenue expenditure at 7.0%.
  • The FY26 Union Budget has estimated GoI’s FY25 (RE) fiscal deficit at 4.8% of GDP, an improvement over the budgeted level of 4.9%, whereas the revenue deficit at 1.9% of GDP in FY25 (RE) is marginally higher than the budgeted level of 1.8%.
  • Gross bank credit grew by 12.4% in December 2024, improving from 11.8% in November 2024.  Growth in bank credit was at a 10-quarter low of 12.4% in 3QFY25, falling from 14.8% in 2QFY25.
  • Merchandise trade deficit widened to US$23.0 billion in January 2025 from US$21.9 billion in December 2024.
  • Merchandise exports showed a contraction for the third successive month at (-)2.4% in January 2025 while growth in imports increased to 10.3% in January 2025 from 4.9% in December 2024.
  • Growth in exports and imports excluding oil, gold/silver and jewelry surged to 14.3% and 20.3% in January 2025 from 8.3% and 3.9% respectively in December 2024.
  • Net FDI and FPI turned positive, with inflows amounting to US$0.7 billion and US$1.7 billion, respectively, in December 2024.
  • Average global crude price increased to a six-month high of US$78.2/bbl. in January 2025 from US$72.3/bbl. in December 2024.
  • The IMF projected global growth at 3.3% in 2025. India’s FY26 growth is projected to remain stable at 6.5%.
  • In the medium-term, for ensuring a growth of about 6.5-7.0%, GoI should target a GTR-GDP ratio of 14.0% and a combined tax-GDP ratio to above 20% by FY31, thereby facilitating reaching the FRBM consistent 40% debt-GDP target of the GoI by FY35.

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    How EY can help

    The team

    D. K. Srivastava

    EY India Chief Policy Advisor
    A noted economist, D.K. Srivastava is an Honorary Professor at Madras School of Economics and Member of the Advisory Council to the 15th and 16th Finance Commissions.
    Gurugram, IND
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