CONTENTS

1. Economic Survey 2023-24

Economic Survey 2023-24

Context:

Recently, Economic Survey 2023-24 was tabled in Parliament by Union Minister for Finance and Corporate Affairs.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. Economic Survey Highlights

Economic Survey Highlights

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

• GDP Growth Projection:
  • Real GDP Growth: Conservatively projected at 6.5–7% for FY24, with actual growth at 8.2%.
  • Quarterly Performance: Exceeded 8% in three out of four quarters of FY24.
• Economic Performance:
  • Gross Value Added (GVA): Grew by 7.2% (at 2011-12 prices).
  • Net Taxes: Increased by 19.1% at constant prices.
• Inflation and External Sector:
  • Retail Inflation: Reduced from 6.7% in FY23 to 5.4% in FY24.
  • Current Account Deficit (CAD): Improved to 0.7% of GDP from 2.0% in FY23.
• Economic Recovery:
  • Comparison to FY20: Real GDP in FY24 was 20% higher than FY20.
  • Tax Collection: 55% from direct taxes, 45% from indirect taxes.
  • Government Expenditure: Ensured free food grains for 81.4 crore people; increased capital spending.

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

• Banking and Financial Sector:
  • Policy Rate: RBI maintained a steady policy repo rate at 6.5%.
  • Credit Disbursal: ₹164.3 lakh crore, growing by 20.2% by March 2024.
  • Growth in Broad Money (M3): 11.2% YoY as of 22 March 2024, up from 9% previous year.
• Banking Sector Health:
  • Credit Growth: Robust, with significant growth in lending to services, personal loans, and agriculture.
  • Industrial Credit Growth: 8.5%, up from 5.2% a year ago.
  • IBC Effectiveness: 31,394 corporate debtors disposed of, involving ₹13.9 lakh crore.
• Capital Markets:
  • Primary Capital Markets: Facilitated capital formation of ₹10.9 lakh crore.
  • Market Capitalisation: Significant surge, with the market capitalisation to GDP ratio being the fifth largest globally.
• Financial Inclusion:
  • Focus: Enabler for sustainable growth, reduction of inequality, and poverty elimination.
  • Challenges: Digital Financial Inclusion (DFI) and transformation of the financial sector.
• Insurance and Microfinance:
  • Insurance Market: Poised to be one of the fastest-growing.
  • Microfinance: Second largest in the world after China.

Chapter 3: Prices and Inflation – Under Control

• Inflation Management:
  • Retail Inflation: Maintained at 5.4%, the lowest since the pandemic.
  • Price Cuts: LPG, petrol, and diesel prices reduced, contributing to lower fuel inflation.
  • Food Inflation: Increased to 7.5% in FY24 from 6.6% in FY23 due to supply chain disruptions and weather impacts.
• Government Actions:
  • Price Stability Measures: Price reductions, stock management, open market operations, and trade policy measures.
• Regional Inflation Variations:
  • States and UTs: 29 recorded inflation below 6% in FY24.
  • Rural vs. Urban Inflation: Higher rural inflation in states with higher overall inflation.
• Future Projections:
  • RBI Projections: Inflation expected to fall to 4.5% in FY25 and 4.1% in FY26.
  • IMF Forecasts: 4.6% inflation in 2024 and 4.2% in 2025 for India.

Chapter 4: External Sector – Stability Amid Plenty

• External Sector Performance:
  • Rank Improvement: India’s rank in the World Bank’s Logistics Performance Index improved from 44th in 2018 to 38th in 2023.
  • Current Account Deficit (CAD): Narrowed to 0.7% of GDP in FY24 due to moderated merchandise imports and rising services exports.
• Trade and Export Performance:
  • Goods Exports Share: Increased to 1.8% in FY24 from an average of 1.7% during FY16-FY20.
  • Services Exports: Grew by 4.9% to USD 341.1 billion, primarily driven by IT/software services and ‘other’ business services.
• Remittances and External Debt:
  • Remittances: India is the top recipient globally, with USD 120 billion in 2023.
  • External Debt: Maintained at a sustainable level, with a debt to GDP ratio of 18.7% as of March 2024.

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

• Policy Focus Areas:
  • Job and Skill Creation: Essential for future growth.
  • Agriculture Potential: Maximizing output and efficiency.
  • MSME Bottlenecks: Addressing challenges faced by micro, small, and medium enterprises.
  • Green Transition: Managing environmental changes while ensuring growth.
  • China Relationship: Strategically navigating economic interactions.
  • Corporate Bond Market: Expanding and deepening the market.
  • Inequality and Health: Tackling socio-economic disparities and improving health outcomes.
• Amrit Kaal’s Growth Strategy:
  • Key Areas: Boosting private investment, expanding MSMEs, leveraging agriculture, financing green initiatives, bridging education-employment gaps, and strengthening state capacities.
  • Growth Target: Achieving 7%+ growth requires a tripartite collaboration among the Union Government, State Governments, and the private sector.

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

• Climate Action Progress:
  • Climate Goals: India is on track to meet its 2-degree centigrade warming target, according to the International Finance Corporation.
  • Renewable Energy Capacity: Reached 45.4% of installed electricity generation capacity as of 31 May 2024.
  • Emission Intensity: Reduced by 33% from 2005 levels by 2019, with a GDP growth CAGR of about 7% and emissions growth CAGR of about 4%.
• Energy Initiatives:
  • Clean Coal and Energy Savings: Initiatives include the Coal Gasification Mission. Total annual energy savings of 51 million tonnes of oil equivalent, translating to ₹1,94,320 crore in cost savings and 306 million tonnes of emissions reduction.
  • Renewable Energy Demand: Increased demand for land and water due to expansion in renewable energy and clean fuels.
  • Green Bonds: Issued ₹16,000 crore in January-February 2023 and ₹20,000 crore in October-December 2023.

Chapter 7: Social Sector – Benefits that Empower

• Welfare and Digitisation:
  • Welfare Expenditure Growth: Grew at a CAGR of 12.8% from FY18 to FY24, surpassing the nominal GDP growth of 9.5%.
  • Digitisation Impact: Enhanced efficiency and impact of welfare programs through digital means.
• Social Indicators:
  • Inequality Reduction: Gini coefficient decreased from 0.283 to 0.266 in rural areas and from 0.363 to 0.314 in urban areas.
  • Ayushman Bharat Scheme: More than 34.7 crore cards generated, covering 7.37 crore hospital admissions. Mental health support includes 22 disorders under the Ayushman Bharat – PMJAY health insurance.
• Educational and Housing Achievements:
  • Early Childhood Education: ‘Poshan Bhi Padhai Bhi’ program aims to create a universal preschool network at Anganwadi Centres.
  • Higher Education Enrollment: Increased by 31.6% since FY15, with notable growth in underprivileged sections and female enrollment.
  • R&D Progress: Nearly 1 lakh patents granted in FY24, up from less than 25,000 in FY20.
• Infrastructure Development:
  • Housing: 2.63 crore houses constructed under PM-AWAS-Gramin in nine years.
  • Road Construction: 15.14 lakh km completed under the Gram Sadak Yojana since 2014-15.

Chapter 4: External Sector – Stability Amid Plenty

• Global Performance: India’s external sector remains robust despite geopolitical challenges. It improved its rank in the World Bank’s Logistics Performance Index from 44th to 38th (2018-2023).
• Trade Balance: Merchandise import moderation and rising services exports have narrowed the current account deficit by 0.7% in FY24.
• Export Market Share: India’s global export share in goods increased to 1.8% in FY24 from an average of 1.7% (FY16-FY20). Services exports grew by 4.9% to USD 341.1 billion.
• Remittances: India is the top global remittance recipient, reaching USD 120 billion in 2023.
• External Debt: The external debt-to-GDP ratio stands at a sustainable 18.7% as of March 2024.

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

• Policy Focus: Key areas include job creation, agriculture, MSME support, green transition, addressing inequality, and improving health.
• Growth Strategy: Six focal areas: private investment, MSME expansion, agriculture, green finance, education-employment gap, and state capacity building.
• Economic Growth: To achieve 7%+ growth, a collaborative effort between Union, State governments, and private sector is essential.

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

• Climate Actions: India is on track to meet 2°C warming goals. Non-fossil fuel share in electricity capacity reached 45.4%.
• Emissions and GDP: Emission intensity of GDP reduced by 33% (2005-2019). Energy savings and emission reductions have been significant.
• Green Bonds: Issued ₹16,000 Crore in early 2023 and ₹20,000 Crore later in the year.

Chapter 7: Social Sector – Benefits that Empower

• Welfare Impact: Digitisation has enhanced welfare impact. Nominal GDP growth (9.5%) outpaced welfare expenditure growth (12.8%).
• Health and Education: Major achievements include Ayushman Bharat coverage, early childhood education through Anganwadi Centres, and increased higher education enrolment.
• Infrastructure and Innovation: Significant progress in R&D and infrastructure, including housing and road construction.

Chapter 8: Employment and Skill Development: Towards Quality

• Labour Market: Unemployment rates are low; youth unemployment has declined significantly. Female labour force participation is increasing.
• Sectoral Employment: Employment is rising in larger factories and sectors like manufacturing, with a growing gig workforce.
• Job Creation: India needs to create about 78.5 lakh jobs annually until 2030. Direct public investment can significantly contribute to job creation.

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

• Sector Growth: The agriculture sector has grown steadily with allied sectors emerging as growth centers. Credit and Kisan Credit Card issuance have increased.
• Research Payoff: Agricultural research investments yield significant returns.

Chapter 10: Industry – Small and Medium Matters

• Industrial Growth: The sector achieved 9.5% growth in FY24, with notable contributions from chemicals, pharmaceuticals, and electronics.
• Manufacturing: Increased focus on R&D and innovation is crucial. PLI schemes have attracted substantial investments and job creation.

Chapter 11: Services – Fuelling Growth Opportunities

• Sector Contribution: Services now contribute 55% to GVA. India’s services exports and digital services share have grown.
• Transport and Tourism: Significant growth in aviation, railways, and tourism. The real estate sector also saw substantial growth.

Chapter 12: Infrastructure – Lifting Potential Growth

• Public Investment: Increased investment in infrastructure, including road construction, railways, and airports.
• Rank Improvements: Improved rankings in international logistics and clean energy investments.

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

• Climate Strategies: Critique of global climate strategies; emphasis on India’s unique approach focusing on harmonious human-nature relationships and sustainable practices.