Economic Survey 2023-24 Highlights- Explained Pointwise

Finance Minister Nirmala Sitharaman tabled the Economic Survey document in Parliament today. The Economic Survey is an annual document presented by the Government of India’s Ministry of Finance. It is typically released a day before the Union Budget. It provides a comprehensive review of the country’s economic performance over the past year. The survey also offers insights and recommendations for future economic policies and highlights the key challenges and opportunities facing the economy.

Chapter 1: State of the Economy – Steady as She Goes

1. Diverging Global Growth Patterns- Global economic growth has been 3.2% in 2023 as per the April World Economic Outlook. However, diverging growth patterns have emerged among countries. The stark difference in the growth performance of countries has been on account of domestic structural issues, uneven exposure to geopolitical conflicts and the impact of monetary policy tightening.

2. India carried Forward Economic Growth Despite Challenges- India’s economy carried forward the momentum it built in FY23 into FY24 despite a gamut of external challenges. Indian economy has recovered and expanded in an orderly fashion post pandemic. The real GDP in FY24 was 20 per cent higher than its level in FY20, a feat that only a very few major economies achieved. The focus on maintaining macroeconomic stability ensured that external challenges had minimal impact on India’s economy.

3. India’s real GDP growth- India’s real GDP grew by 8.2 per cent in FY24, exceeding 8 per cent mark in three out of four quarters of FY24. Economic Survey conservatively projects a real GDP growth of 6.5–7 per cent for FY 25, with risks evenly balanced, cognizant of the fact that the market expectations are on the higher side.

4. Improved performance on Inflation- With deft management of administrative and monetary policies, retail inflation reduced from 6.7 per cent in FY23 to 5.4 per cent in FY24.

5. Improved performance on CAD- Current Account Deficit (CAD) stood at 0.7 per cent of the GDP during FY24, which is an improvement from the deficit of 2.0 per cent of GDP in FY23.

6. Direct and Indirect Tax Collection- 55% of tax collected accrued from direct taxes and remaining 45% from indirect taxes.

Chapter 2: Monetary Management and Financial Intermediation- Stability is the Watchword

Steady Inflation rate- RBI maintained a steady policy rate throughout the year with overall inflation rate under control. Monetary Policy committee (MPC) maintained the status quo on the policy repo rate at 6.5 per cent in FY24. Inflation made to gradually align with its target while supporting growth.

Stellar performance of India’s financial and banking sector in FY24- 

Banking Sector performance- Double-digit and broad-based growth in bank credit, gross and net non-performing assets at multi-year lows, and improvement in bank asset quality highlight the government’s commitment to a healthy and stable banking sector.

a. Growth in Bank credit disbursal- Credit disbursal by Scheduled Commercial Banks (SCBs) stood at ₹164.3 lakh crore, growing by 20.2% at the end of March 2024.
b. Growth in broad money (M3)- The growth in broad money was 11.2 per cent (YoY) as on 22 March 2024, compared to 9 per cent a year ago.

Financial sector performance- The market capitalisation of the Indian stock market has seen a remarkable surge, with the market capitalisation to GDP ratio being the fifth largest in the world. Primary capital markets facilitated capital formation of ₹10.9 lakh crore during FY24 (approximately 29 per cent of the gross fixed capital formation of private and public corporates during FY23).

Financial Inclusion- Financial inclusion is not just a goal but also an enabler for sustainable economic growth, reduction of inequality and elimination of poverty. The next big challenge is Digital Financial Inclusion (DFI).

Dominance of Insurance and Microfinance sector- India poised to emerge as one of the fastest-growing insurance markets in the coming decade. Indian microfinance sector emerges as the second largest in the world after China.

Chapter 3: Prices and Inflation-Under Control

Central Government’s timely policy interventions and the Reserve Bank of India’s price stability measures helped maintain retail inflation at 5.4 per cent– the lowest level since the pandemic. Central Government announced price cuts for LPG, petrol, and diesel. As a result, retail fuel inflation stayed low in FY24.

Food Inflation- Agriculture sector faced challenges due to extreme weather events, depleted reservoirs, and crop damage, which impacted farm output and food prices. Food inflation stood at 6.6 per cent in FY23 and increased to 7.5 per cent in FY24. Government took appropriate administrative actions, including dynamic stock management, open market operations, subsidised provision of essential food items and trade policy measures, which helping to mitigate food inflation.

Projected Inflation- RBI projects inflation to fall to 4.5 per cent in FY25 and 4.1 per cent in FY26, assuming normal monsoon and no external or policy shocks. IMF forecasts inflation of 4.6 per cent in 2024 and 4.2 per cent in 2025 for India.

Chapter 4 : External Sector- Stability Amid Plenty

India’s external sector remained strong amidst on-going geopolitical headwinds accompanied by sticky inflation.

India’s share in global exports of goods and services- India is gaining market share in global exports of goods and services. Its share in global goods exports was 1.8 per cent in FY24, against an average of 1.7 per cent during FY16-FY20. India’s services exports grew by 4.9 per cent to USD 341.1 billion in FY24, with growth largely driven by IT/software services and ‘other’ business services. The moderation in merchandise imports and rising services exports have improved India’s current account deficit which narrowed 0.7 per cent in FY24.

Remittances- India is the top remittance recipient country globally, with remittances reaching a milestone of USD 120 billion in 2023.

External Debt- India’s external debt has been sustainable over the years, with the external debt to GDP ratio standing at 18.7 per cent at the end of March 2024.

Chapter 5: Medium-Term Outlook – A Growth Strategy for New India

For Indian economy to grow at 7 per cent plus, a tripartite compact between the Union Government, State Governments and the private sector is required.

Amrit Kaal’s growth strategy based on six key areas- Boosting private investment, expansion of MSMEs, agriculture as growth engine, financing green transition, bridging education-employment gap, and building capacity of States.

Key areas of policy focus in the short to medium term- Following should be the key areas of policy focus in the short to medium term- job and skill creation, tapping the full potential of the agriculture sector, addressing MSME bottlenecks, managing India’s green transition, deftly dealing with the Chinese conundrum, deepening the corporate bond market, tackling inequality and improving our young population’s quality of health.

Chapter 6: Climate Change and Energy Transition: Dealing with Trade-Offs

A report by the International Finance Corporation recognises India’s efforts to achieve committed climate actions, highlighting that it is the only G20 nation in line with 2-degree centigrade warming.

CAGR of GDP and emissions- India’s GDP between 2005 and 2019 has grown with a Compound Annual Growth Rate (CAGR) of about 7 per cent, whereas the emissions grew at a CAGR of about 4 per cent.

Renewable energy capacity and improved energy efficiency- India has made significant progress on climate action in terms of an increase in its renewable energy capacity and improvement in energy efficiency. As of 31 May 2024, the share of non-fossil sources in the installed electricity generation capacity has reached 45.4 per cent. Further, the country has reduced the emission intensity of its GDP from 2005 levels by 33 per cent in 2019.

Chapter 7: Social Sector- Benefits that Empower

New Welfare Approach- The new welfare approach focuses on increasing the impact per rupee spent. The digitisation of healthcare, education and governance has been a force multiplier for every rupee spent on a welfare programme.

Nominal GDP growth and welfare expenditure- Between FY18 and FY24, nominal GDP has grown at a CAGR of around 9.5 per cent while the welfare expenditure has grown at a CAGR of 12.8 per cent.

Decline in Gini Coefficient- Gini coefficient, an indicator of inequality, has declined from 0.283 to 0.266 for the rural sector and from 0.363 to 0.314 for the urban sector of the country.

Healthcare and Nutrition- 
More than 34.7 crore Ayushman Bharat cards have been generated, and the scheme has covered 7.37 crore hospital admissions.
The challenge of ensuring mental health is intrinsically and economically valuable. 22 mental disorders are covered under the Ayushman Bharat – PMJAY health insurance.
‘Poshan Bhi Padhai Bhi’ programme for early childhood education aims to develop the world’s largest, universal, high-quality preschool network at Anganwadi Centres.

Education and R&D

Vidyanjali initiative played crucial role in enhancing educational experiences of over 1.44 cr. students facilitating community engagement and through volunteer contributions.
The rise in enrolment in higher education has been driven by underprivileged sections such as SC, ST and OBC, with a faster growth in female enrolment across sections, witnessing 31.6 per cent increase since FY15.
India is making rapid progress in R&D, with nearly one lakh patents granted in FY24, compared to less than 25,000 patent grants in FY20.

Chapter 8: Employment and Skill Development: Towards Quality

Decline in Unemployment Rates- Indian labour market indicators have improved in the last six years, with the unemployment rate declining to 3.2 per cent in 2022-23. According to PLFS, youth (age 15-29 years) unemployment rate has declined from 17.8 per cent in 2017-18 to 10 per cent in 2022-23. From the gender perspective, the female labour force participation rate (FLFPR) has been rising for six years.

Future Job needs- Indian economy needs to generate an average of nearly 78.5 lakh jobs annually until 2030 in the non-farm sector to cater to the rising workforce. Compared to 50.7 crore persons in 2022, the country would need to care for 64.7 crore persons in 2050.

Chapter 9: Agriculture and Food Management – Plenty of Upside Left If We Get It Right

The allied sectors of Indian agriculture are steadily emerging as robust growth centres and promising sources for improving farm incomes.

Key Growth Metrices of Indian Agriculture
Agriculture and allied sector registered an average annual growth rate of 4.18 per cent at constant prices over the last five years.As of 31 January 2024, the total credit disbursed to agriculture amounted to ₹ 22.84 lakh Crore. As of January 31, 2024, banks issued 7.5 crores Kisan Credit Card (KCC) with a limit of ₹9.4 lakh crores. An area of 90.0 lakh hectares has been covered under micro irrigation in the country under the Per drop more crop (PDMC) from 2015-16 to 2023-24.

Importance of R&D- It is estimated that for every rupee invested in agricultural research (including education), there is a payoff of ₹ 13.85.

Chapter 10: Industry-Small and Medium Matters

Growth rate of Industry- Economic growth of 8.2 per cent in FY24 was supported by an industrial growth rate of 9.5 per cent. Despite disruptions on many fronts, the manufacturing sector achieved an average annual growth rate of 5.2 per cent in the last decade with the major growth drivers being chemicals, wood products and furniture, transport equipment, pharmaceuticals, machinery, and equipment.

Status of India’s Industries- India’s pharmaceutical market stands as world’s third largest by volume with the valuation of USD 50 billion. India is the world’s second-largest clothing manufacturer and one of the top five exporting nations.

PLI Scheme importance- PLI schemes attracted over ₹1.28 Lakh Crore of investment until May 2024, which has led to production/sales of ₹10.8 Lakh Crore and employment generation (direct & indirect) of over ₹8.5 Lakh.

Chapter 11: Services- Fuelling Growth Opportunities

Service sector GVA- Services sector contribution to the overall Gross Value Added (GVA) has now reached to the level prior to pandemic i.e. about 55%. The services sector has the highest number of active companies (65 per cent). A total number of 16,91,495 active companies exist in India as of 31 March 2024. Globally, India’s services exports constituted 4.4 per cent of the world’s commercial services exports in 2022.

Service Sector Industries Status
a. Revenue-earning freight in FY24 (excluding Konkan Railway Corporation Limited) witnessed an increase of 5.3 per cent in FY24 over the previous year.
b. Tourism industry witnessed over 92 lakh foreign tourist arrivals in 2023, implying a YoY increase of 43.5 per cent.
c. In 2023, residential real estate sales in India were at their highest since 2013, witnessing a 33 per cent YoY growth, with a total sale of 4.1 lakh units in the top eight cities.
d. Global Capability Centres (GCCs) in India have grown significantly, from over 1,000 centres in FY15 to more than 1,580 centres by FY23.
e. The Indian e-commerce industry is expected to cross USD 350 billion by 2030.

Chapter 12: Infrastructure – Lifting Potential Growth

Buoyant public sector investment has had a pivotal role in funding large-scale infrastructure projects in the recent years.

The average pace of NH construction increased by nearly 3 times from 11.7 km per day in FY14 to around 34 km per day by FY24.

Capital expenditure on Railways has increased by 77 percent in the past 5 years, with significant investments in the construction of new lines, gauge conversion and doubling. Indian Railways to introduce Vande metro trainset coaches in FY 25.

In FY24, new terminal buildings at 21 airports have been operationalised which has led to an overall increase in passenger handling capacity by approximately 62 million passengers per annum.

Chapter 13: Climate Change and India: Why We Must Look at the Problem Through Our Lens

Current global strategies for climate change are flawed and not universally applicable. The Western approach does not seek to address the root of the problem, i.e. overconsumption, but rather chooses to substitute the means to achieve overconsumption.

A one-size-fits-all approach will not work, and developing countries need to be free to choose their own pathways. India’s ethos emphasizes a harmonious relationship with nature, in contrast to the culture of over consumption in other parts of the developed world. Shift towards the ‘traditional multi-generational households’ would create the pathway towards sustainable housing.

‘Mission LiFE‘ focuses on human-nature harmony promoting mindful consumption than over consumption that lies at the root of global climate change problem.