National report of India to the 14th BRICS Trade Union Forum 23 April, 2025 − Brasilia, Brazil
India's Economic Landscape Amid Global Trade Challenges
The global economy is currently experiencing significant turbulence due to escalating trade tensions and the imposition of substantial tariffs by major economies. These developments have led to increased market volatility and heightened fears of a potential recession. Despite these challenges, the BRICS nations are demonstrating resilience. India stands out as a particularly bright spot, showcasing robust economic performance and growth prospects.
Economic Growth and Trade Dynamics
Indian economy is projected to grow between 6.3% and 6.8% in the fiscal year 2025-26, driven by strong private consumption and investment. This growth is further supported by increased government capital expenditure and consumption boosts from tax cuts and interest rate reductions. However, recent U.S. tariffs, including a 26% duty on Indian imports, have introduced new challenges. While government officials maintain that these tariffs are unlikely to disrupt India's core fiscal parameters, some private economists have adjusted their growth forecasts downward by 20-40 basis points. Sectors such as diamond exports, which heavily rely on the U.S. market, are particularly affected, posing risks to employment. The government is assessing the impact and considering support measures, including interest subsidies and credit provision, while opting for diplomatic negotiations over retaliation.
Social Protection and Poverty Alleviation
India has made significant strides in social protection, with coverage doubling from 24.4% in 2021 to 48.8% in 2024, according to the International Labour Organization's World Social Protection Report 2024-26. This progress is attributed to key government initiatives extending benefits such as health insurance, pensions, and employment support to millions. Concurrently, the poverty rate has fallen below 5% in 2024, with extreme poverty nearly eradicated, reflecting substantial improvements in living conditions across the country.
Labor Market and Wage Dynamics
The labor market in India has remained robust, with employment indicators showing strength throughout 2024. Urban unemployment stood at 6.6%, virtually unchanged from the previous year. However, substantial gender gaps persist in labor market participation. Several states, including Tamil Nadu, Himachal Pradesh, Puducherry, Meghalaya, Odisha, and Jharkhand, have implemented significant minimum wage hikes over the past year, with increases of up to 38%. For instance, Odisha recently increased minimum wages by 29%, and Jharkhand by 22%. These adjustments aim to improve the standard of living for workers but have also led to increased wage bills for companies, with some experiencing up to a 25% rise.
Skill Development Initiatives
Recognizing the growing global demand for skilled Indian workers, the Ministry of Skill Development and Entrepreneurship is formulating a new national skilling policy to replace the 2015 'National Policy for Skill Development and Entrepreneurship.' This policy aims to deploy 100,000 care workers annually to developed countries starting in 2027 and emphasizes the use of digital tools and artificial intelligence to identify regions and populations with low skilling levels, facilitating targeted interventions. India has also entered a MoU with the ILO on skill mapping.
Inflation and Monetary Policy
Inflation in India is projected to average 4.5% in the current fiscal year, down from 4.9% in the previous year, indicating effective inflation management. The Reserve Bank of India reduced interest rates by 25 basis points to 6.25% in February and is anticipated to implement further cuts in the upcoming monetary policy review on April 9. These measures aim to stimulate economic activity and support growth.
Investment and Infrastructure
Public sector investment continues to play a pivotal role in funding large-scale infrastructure projects, including improvements in physical and digital connectivity, as well as social infrastructure. Strong investment growth is expected to continue through 2025, contributing to overall economic expansion.
Agricultural Outlook
Favorable monsoon rains in 2024 have improved the sowing areas for major crops, boosting agricultural output expectations for 2025. This development is anticipated to positively impact rural consumption and overall economic growth.
Conclusion
Amid global economic challenges, India continues to demonstrate resilience and robust growth prospects. The government's proactive measures in social protection, poverty alleviation, wage adjustments, skill development, and infrastructure investment are contributing to a stable and promising economic outlook. While external factors such as international trade tensions pose challenges, India's strategic initiatives and policy responses position it favorably for sustained growth and development.