India’s Economic Report Card for 2024: FDI, Trade, and Infrastructure Growth

India’s economic report for 2024 highlights a year of resilience and growth, solidifying its position as an emerging global economic powerhouse. With a projected GDP growth of 6.6 percent for FY2024-25, driven by financial stability and strategic policy initiatives, India continues to advance toward surpassing major global economies. This progress is marked by healthy FDI inflows, an expanding export sector, and notable advancements in infrastructure and financial regulation.

In 2024, India continued with economic expansion, ensuring its status as an emerging global economic powerhouse. With a 6.6 percent gross domestic product (GDP) growth rate, the country retained its position as the world’s fifth-largest economy, steadily narrowing the gap with Germany, which ranks fourth at present. This performance showed India’s consistent trajectory of growth, marked by strategic initiatives and focused economic policies.

India’s GDP per capita, which measures the average economic output per individual, saw a significant rise in 2024. The per capita income growth rate stood at 2.73 percent, indicating progress in the living standards of Indian households. During FY 2022-23, India’s per capita income was nearly INR 200,000 (US$2,336), a striking increase from INR 71,609 (US$836.4) in 2012. This growth, amounting to a 175 percent rise over the past decade, can be attributed to population growth, increasing demand for employment, and expanding economic activities.

India’s financial sector stability: The RBI’s FSR Report for December 2024

The Reserve Bank of India (RBI) released its latest Financial Stability Report (FSR) on December 30, 2024. Its findings align with the GDP growth projection of 6.6 percent for FY2024-25, as previously outlined by the outgoing RBI Governor Shaktikanta Das during the monetary policy announcement on December 6.

It must be noted that the FSR serves as a vital resource for understanding the stability of the Indian financial sector and identifying potential risks and is issued twice a year i.e., June and December. 

Improved asset quality of banks

The FSR report notes that Indian banks have achieved a significant milestone, with gross non-performing assets (NPAs) declining to a 12-year low of 2.6 percent as of September 2024. This improvement is attributed to positive recovery efforts, the strategic write-off of legacy bad loans, and a slowdown in the accumulation of new bad assets.

Economic growth outlook

The RBI projects India’s GDP growth rate at 6.6 percent for the fiscal year 2024–25, indicating a recovery trajectory following the economic slowdown experienced during the first half of the fiscal year. This growth forecast reflects a positive outlook for the economy amid improving financial stability.

Liquidity deficit challenges

The December 2024 FSR notes that India’s banking system is grappling with a growing liquidity deficit, which stood at INR 2.43 trillion (US$28.38 billion) as of December 23, 2024. This deficit is driven by factors such as tax outflows and the central bank’s foreign exchange interventions. To address the issue, market participants anticipate measures like open market bond purchases and potential reductions in the cash reserve ratio (CRR).

Regulatory compliance improvements

The RBI’s FSR report highlights a significant improvement in regulatory compliance among India’s banks and financial institutions. Monetary fines imposed by the RBI from June to November 2024 totaled nearly INR 300 million (US$3.5 million), a notable 47 percent reduction compared to INR 570 million (US$6.65 million) during the same period in the previous year. This decline reflects enhanced adherence to regulatory norms.

Strengthening of NBFCs

The report also makes notes on strengthening of the balance sheets of non-banking financial companies (NBFCs). It states that stress tests conducted by the RBI reveal that even under high-risk scenarios, NBFCs would retain capital levels well above the required minimum, showcasing their improved financial resilience.

The FSR outcome suggests a balanced outlook for India’s financial system, with positive signs of stability and preparedness for potential economic challenges. It reflects progress in critical areas such as asset quality, regulatory compliance, and the robustness of non-banking entities, while also highlighting areas requiring attention, such as liquidity management and macroeconomic risks.

India’s economic outlook for 2025: IMF projection

The latest International Monetary Fund (IMF) projections indicate that India will surpass Japan by 2025 to become the fourth-largest global economy. The country is projected to surpass Japan in the coming year with a nominal GDP of US$4,340 billion. At present, India’s economy is fifth largest in the world.

India’s steady rise in global rankings reflects a combination of factors, including technological advancements, policy interventions, and increasing private sector participation, all of which have contributed to its expanding economic footprint. By 2027, India is anticipated to overtake Germany, securing the third spot in the global rankings.

Healthy FDI inflows and export growth

The foreign direct investment (FDI) in India reached US$1.03 trillion from April 2000 to September 2024, with over 69 percent of inflows occurring since 2014. This was complemented by exports totaling US$778 billion, bolstering India’s global trade presence.

The year 2024 saw major policy reforms, including the liberalization of FDI limits across certain sectors, tax incentives, and improvements in the ease of doing business. These factors have contributed to sustained investor confidence, keeping India as an attractive destination for global capital.

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The geographic trends in the FDI source data indicate popular jurisdictions with which India enjoys strong investment relationships. Notably, Mauritius led with 25 percent of total FDI equity inflow, amounting to US$177.19 billion, primarily due to tax treaties and ease of investment structures. Singapore followed closely, contributing 24 percent of inflows (US$167.47 billion), reflecting its role as a hub for global investment funds. The United States contributed 10 percent (US$67.77 billion) to India FDI, driven by investments in technology, e-commerce, and manufacturing. 

Source: DPIIT fact sheet

FDI inflows in India during 2024 were distributed across various sectors, with a focus on industries that align with the country’s strategic growth priorities. The services sector emerged as the largest recipient, accounting for 16 percent of total FDI inflows, equivalent to US$115.19 billion. This sector includes financial services, IT, and business outsourcing, showcasing its pivotal role in driving investment. Emerging industries like non-conventional energy also began gaining traction, reflecting a shift towards sustainable development and innovation.

Source: DPIIT fact sheet

* The services sector includes financial, banking, insurance, non-financial / business, outsourcing, R&D, courier, technology testing and analysis, others.

In terms of regional distribution of FDI, certain states and union territories in India continue to act as significant hubs. Maharashtra state led with 31 percent of total FDI inflows (US$82.64 billion), benefiting from its industrial base and mature financial ecosystem.  The southern state of Karnataka, accounting for 21 percent of inflows (US$54.57 billion), leveraged its tech-savvy workforce and vibrant startup ecosystem. Additionally, Gujarat (16 percent) and capital Delhi (13 percent) also attracted substantial investments, driven by industrial and infrastructure growth. Other Indian states, including Tamil Nadu, Haryana, and Telangana, have also significantly benefited from FDI inflows, highlighting a broad geographic diversification in investment attraction.

Source: DPIIT fact sheet

India’s trade scenario in 2024

India’s trade performance in 2024 reflects the country’s rising prominence as a key player in international markets. The year 2024 marked achievements in exports and imports, backed by robust policies and strategic partnerships.

Source: Department of Commerce, System on Foreign Trade Performance Analysis Version 3.0

Source: Department of Commerce, System on Foreign Trade Performance Analysis Version 3.0

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India’s trade growth in 2024 was fueled by diversification into high-value and technology-driven sectors, as well as sustained strength in traditional export industries. Key export drivers included:

• Engineering goods: Engineering goods continue to dominate India’s export basket, supported by advancements in manufacturing and increased global demand for Indian machinery and equipment.
• Information technology and services: Bolstered by India’s reputation as a technology hub, IT and business process outsourcing services saw sustained growth, catering to major markets such as the US and Europe.
• Pharmaceuticals: Leveraging its position as a major producer of generic drugs, India expanded its pharmaceutical exports to emerging markets in Africa, Asia, and Latin America.
• Agriculture and processed food: India maintained its position as a top exporter of rice, spices, and marine products, with new markets opening up in the Middle East and Southeast Asia.

Strengthening diplomatic relations

Key bilateral agreements demonstrated India’s efforts in building economic and strategic partnerships. An important achievement was the finalization of a free trade agreement (FTA) with Iceland under the European Free Trade Association (EFTA), facilitating smoother trade flows between the regions. Additionally, a bilateral investment treaty with the United Arab Emirates (UAE) highlighted India’s focus on enhancing its economic ties with the Gulf region.

Further, India’s President Droupadi Murmu’s visit to Fiji in August 2024 indicated New Delhi’s interest in strengthening ties with the Pacific Island nations, an area of growing strategic importance.

India also hosted the third edition of the Voice of the Global South Summit, an event attended by representatives from over 100 countries. This summit amplified the voices of developing nations, showcasing India’s leadership in fostering unity among the global south. Building on its influence from hosting the G20 Summit in 2023, India further strengthened its role as a bridge between advanced economies and emerging markets.

Major infrastructure development in India in 2024

India’s infrastructure landscape in 2024 experienced key advancements, such as expanding connectivity, urban development, and economic growth. India’s central government announced a range of mega projects while ongoing initiatives progressed simultaneously.

Key highlights of India’s infrastructure development in 2024:

1. Road construction and connectivity: India achieved a milestone in road infrastructure by constructing an average of 27 kilometers of new roads per day. This expansion is expected to improve regional connectivity and support country’s economic growth by facilitating trade and transportation.
2. Railway expansion and modernization: The completion of the Udhampur-Srinagar-Baramulla rail link in Jammu and Kashmir marks a crucial juncture in regional connectivity. This project is expected to enhance economic opportunities, tourism, and mobility in the northernmost region of the country. The central government also announced additional high-speed rail corridors to complement the Mumbai-Ahmedabad bullet train project, reinforcing India’s ambition to modernize its rail network.
3. Energy infrastructure: India expanded its renewable energy portfolio, with major investments in solar, wind, and hydropower projects. These initiatives align with the nation’s goal to reduce its carbon footprint and achieve net-zero emissions by 2070. India seeks to develop multiple green hydrogen hubs to position itself as a global leader in renewable energy.

Major mega infrastructure projects announced in India in 2024

Here are some of the major mega projects that were announced in India in 2024:

1. Bharat expressway project: A pan-India expressway project aimed at connecting major metropolitan cities with high-speed road networks, reducing travel time and boosting economic activity.
2. North-East connectivity corridor: A critical project to enhance road, rail, and air connectivity in the North-Eastern states, integrating the region more effectively with the rest of the country.
3. National Logistics Policy implementation: Infrastructure upgrades across major ports and logistics hubs to improve India’s ease of doing business and reduce trade costs.
4. Ganga expressway project: A mega highway linking Prayagraj to Meerut, significantly improving connectivity in Uttar Pradesh and fostering economic development.
5. Regional airport development initiative: Under the UDAN scheme, the central government announced the construction of 20 new regional airports, ensuring better connectivity in Tier-2 and Tier-3 cities.
6. Clean energy transition projects: Development of the India Green Energy Corridor and Green Hydrogen Mission to enhance energy security and promote renewable energy integration.
7. Sagarmala 2.0: Expansion of the Sagarmala project to modernize coastal infrastructure and ports, facilitating better trade and boosting the blue economy.

Defense and security

India’s defense budget reached a record INR 6.22 trillion (US$72.65 billion), reflecting New Delhi’s keenness to modernize the country’s military capabilities. One of India’s key diplomatic efforts in 2024 was strengthening its defense cooperation. The country signed a US$3.5 billion drone deal with the United States, marking a major milestone in their bilateral defense relations. Notably, the disengagement of Indian and Chinese forces in Ladakh signaled easing regional tensions.

Stock market trends

India’s stock market experienced volatility in 2024. While indices like the Nifty 50 and Sensex gained 10.5 percent in the first half of the year, the second half saw declines due to domestic and global challenges. Despite the setbacks, experts remain optimistic about a sustained bull run driven by overall macroeconomic stability and policy measures.

Economic challenges and resilience

The July-September quarter saw GDP growth slow to 5.4 percent due to high food inflation. However, the RBI maintained steady interest rates and eased monetary conditions to address the slowdown. The economy is poised for recovery, with projected growth in emerging markets and reduced reliance on oil imports signaling a positive trajectory.

India’s 2024 economic report card: Key takeaways

1. Economic growth: India sustained robust economic growth with a projected GDP growth rate of 6.6 percent for FY2024-25. The country has maintained its position as the world’s fifth-largest economy and narrowed the gap with Germany.
2. Financial stability and banking sector: Gross NPAs fell to a 12-year low of 2.6 percent, reflecting improved asset quality. While the banking system faced liquidity deficits, necessitating measures such as bond purchases and potential cash reserve ratio adjustments.
3. Foreign direct investment: India’s FDI inflows reached US$1.03 trillion (2000–2024), with key contributors being Mauritius (25 percent), Singapore (24 percent), and the US (10 percent). The services sector led FDI inflows, accounting for 16 percent of total investments.
4. Exports and trade: India’s total exports grew in value, driven by high-value and technology-driven sectors like engineering goods, IT, and pharmaceuticals. Key export drivers included agricultural products, processed food, and generic pharmaceuticals.
5. Regional and sector-wise investment patterns: The states of Maharashtra and Karnataka emerged as top FDI destinations in India, attracting 31 percent and 21 percent of inflows, respectively. Emerging industries like non-conventional energy saw increasing FDI attention.
6. Infrastructure and development: Major projects included the Bharat Expressway, Ganga Expressway, and the UDAN regional airport initiative. Renewable energy investments supported India’s carbon neutrality goals, with green hydrogen hubs gaining prominence.
7. Global standing: The IMF projected India to surpass Japan as the fourth-largest economy by 2025 and Germany by 2027. Strategic partnerships, including free trade agreements and defense cooperation, bolstered India’s international presence.
8. Economic challenges: India also witnessed a dip in economic growth in Q2 2024 (5.4 percent) due to inflation and global challenges, but recovery is expected through monetary easing and structural reforms.
9. Defense and security: The country’s defense spending reached a record US$72.65 billion, emphasizing modernization and partnerships, including a US$3.5 billion drone deal with the US.
10. Key insights into financial sector stability: The latest findings in the RBI’s FSR December 2024 report highlight progress in regulatory compliance, NBFC resilience, and financial sector stability. The report also stressed liquidity management and macroeconomic risk preparedness.
11. Social indicators: India’s GDP per capita rose by 2.73 percent in 2024, reflecting improved living standards.
12. Stock market trends: A mixed performance with early gains and late-year declines; long-term optimism remains strong.

(US$1 = INR 85.61)

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