 "Union Budget 2024: Here's what the Economic Survey says about key sectors")
Finance Minister Nirmala Sitharaman tabled the FY24 Economic Survey in Parliament on Monday (July 22), a day before the full Budget is presented. While the survey document revealed that the Indian economy is on a “strong wicket” and “stable footing,” it also highlighted the need for sustaining foreign investors’ interest in the backdrop of a volatile global economy and geopolitical tensions.
The document further mentioned the need for elected and appointed officials to indulge in conversation, cooperation, collaboration, and coordination to ensure multiple developmental pathways for the nation and ensure a comprehensive transformation towards economic and cultural success.
What does the Economic Survey say about the GDP outlook?
The survey document highlighted that the Indian economy has recovered swiftly from the pandemic, with real Gross Domestic Product (GDP) in FY24 being 20 per cent higher than FY20 levels, reflecting a 4.6 per cent compounded annual growth rate (CAGR) despite a decline in FY21.
The current GDP is near the pre-pandemic trajectory as of the fourth quarter of FY24. From FY10 to FY20, India grew at an average annual rate of 6.6 per cent.
For FY25, the Economic Survey projected a conservative real GDP growth of 6.5–7 per cent, although noting uncertainties, with risks being ‘evenly balanced’.
What does the Survey reveal about the State of the economy?
The document noted that India's domestic growth in FY24 has been supported by strong investment demand and improved private sector balance sheets. This is backed by structural reforms, improved agriculture performance due to favourable monsoon forecasts, and potential growth in services exports. However, private capital formation might slow due to fears of cheaper imports.
Meanwhile, the document also highlighted that geopolitical conflicts could disrupt supply chains, elevate commodity prices, and delay monetary policy easing, potentially affecting India's external sector. Although global trade is expected to improve in 2024, protectionism and geopolitical fragmentation could pose risk.
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What does the Economic Survey document say about Inflation?
Noting the Reserve Bank of India (RBI) and the International Monetary Fund (IMF) projections of India's consumer price inflation to align with the inflation target by FY26, the Economic Survey suggested that for long-term price stability, it is necessary to improve the effectiveness of government actions on price flare-ups by enhancing price monitoring systems and constructing a producer price index for goods and services.
Additionally, it suggested revising the consumer price index with updated weights and item baskets based on the latest household consumer expenditure survey.
Furthermore, the document also took note of unstable commodity prices due to global supply and demand disruptions. The World Bank predicts an increase in the global supply and demand for commodities, with a 3 per cent decline in the commodity price index in 2024 and a 4 per cent decrease in 2025, driven by lower energy, food, and fertiliser prices. It, however, noted that the downward trend in commodity prices is positive for India's domestic inflation outlook.
What is the state of Employment in India?
The Economic Survey revealed that the employment situation in India has seen a positive transformation in the last decade, with advancements in formalisation, skill development, entrepreneurship, industry diversification, and inclusive growth.
However, it also noted that despite the government's robust efforts, challenges remain, such as formalising the growing workforce, creating jobs in sectors that can absorb workers from agriculture, and ensuring social security for regular wage employees, with 53 per cent lacking such benefits.
Suggesting potential areas that can aid in improving the employment scenario, the document noted that state governments can aid job creation by reducing compliance burdens and reforming laws to support development priorities.
Additionally, the agro-processing sector holds the potential for large-scale job creation, particularly for rural youth and women, through the convergence of schemes and focused national initiatives.
Noting the evolution of India's employment landscape with the rise of Artificial Intelligence (AI) and automation, it suggested necessitating investment in research to ensure AI-driven prosperity. Improving care infrastructure for children and the elderly is crucial to enhance female workforce participation.
For the private sector, it noted that while businesses sometimes hesitate to invest due to demand visibility concerns, balancing capital and labour deployment is essential for long-term growth and social stability. Skilling remains a priority, with market-based solutions seen as effective.
What does the Eco-Survey say about India's growth outlook?
Noting India’s resilience over the past decade, the document highlighted that growth reforms have put India on a solid growth path, positioning it to soon become the world's third-largest economy. The IMF projects India's growth for 2024-25 at 6.8 per cent, driven by strong domestic demand and a growing working-age population, making it the fastest-growing G20 economy.
To further strengthen the growth outlook, the document encouraged steady organic growth in the private sector to generate jobs and fair income distribution and leveraging public-private partnerships and innovative financing instruments to support India's green transition.
Addressing the credit gap, deregulation, enhancing connectivity, and implementing an export strategy for market expansion for Micro, Small, and Medium Enterprises (MSME) development, the Economic Survey also highlighted that it is imperative to utilise intelligent, environmentally sustainable policies to boost agriculture as a growth engine.
What does it reveal about the External sector?
The Economic Survey highlighted that India's merchandise trade deficit narrowed in FY24 due to lower international commodity prices despite ongoing geopolitical headwinds. Increased service exports and a surplus in the current account deficit (CAD) of 0.6 per cent of GDP in the fourth quarter of FY24 have improved the economic outlook.
Future declines in the trade deficit are expected as the Production Linked Incentive (PLI) scheme expands and India enhances its manufacturing capabilities, it added. Recently signed Free Trade Agreements (FTAs) are anticipated to boost India's export market share.
However, geopolitical tensions, falling demand from major trading partners, rising trade costs, commodity price volatility, and trade policy changes pose risks to India’s external sector. To counter these challenges, India is enhancing its logistics and infrastructure, exemplified by projects like the International North-South Transport Corridor (INSTC) and the India-Middle East Europe Corridor (IMEC), and promoting globalisation in its services sector, the document noted.
How has the Social sector fared according to the Survey?
Talking about the improvements in the social sector, the document noted that India's economic strategy emphasises welfare reform, focusing on empowerment, efficient service delivery, and private sector and civil society participation.
It further talked about several initiatives by the government which are improving the quality of life of Indians. Digitalisation in healthcare, education, and governance enhances welfare programme efficiency. Meanwhile, the National Education Policy 2020 aims to achieve foundational literacy and numeracy for all children, addressing Covid-induced learning loss is critical.
Ayushman Bharat improves healthcare access and reduces debt, while mental health initiatives are crucial in the digital age, the survey noted.
Are there any agriculture upsides?
The agriculture sector has averaged 4.18 per cent growth over the past five years, the Survey noted. It also said that emphasising allied sectors like animal husbandry, dairying, and fisheries can significantly boost farmers' incomes.
Citing the example of China, the document said that smallholder farmers should transition to high-value agriculture, such as fruits, vegetables, fisheries, poultry, and dairy, to increase their incomes. It also suggested promoting crop diversification towards oilseeds, pulses, and horticulture requires investment in agri-infrastructure, credit accessibility, and suitable market institutions.
Additionally, it noted that the minimum support price (MSP) has positively impacted crop prices, especially for heavily procured crops like paddy and wheat, adding that initiatives like E-NAM, promoting Farmer Producer Organizations (FPOs), and cooperative participation in agri-marketing can improve market infrastructure and price discovery, incentivising states to modernise agricultural marketing.
How to deal with climate change?
On the climate front, the Economic Survey took a rather philosophical turn, talking about the concept of "Thahraav" or settlement/contentment, characterised by equanimity, which is vital yet elusive in modern life.
Noting that the world produces over 2 billion tons of municipal solid waste annually, projected to rise by 70 per cent by 2050, the survey said that the relentless pursuit of consumption diverts focus from sustainability, addressing symptoms rather than root causes. Climate change efforts must respect sovereign choices and economic needs but emphasise individual behaviour centred on sustainable living ("LiFE"), it noted.
What about infrastructure?
Talking about the transformative changes in India’s infrastructure realm, the document noted that infra-development in the country is still public sector-dominant. For the country to continue on an infrastructure expansion path, it said that there is an urgent need for a higher level of financing from the private sector, with support from the state and central governments.
What does it reveal about Indian Industry?
The Economic Survey revealed that over the last decade, industry outputs have realigned with heavy industries like steel, pharmaceuticals, transport equipment, etc., gaining in strength, while textiles, food products, beverages, and petroleum products, among others, losing out on their prominent positions.
Additionally, while the gainers have turned into major net exporters, the import dependency in sectors such as coal, capital goods, and chemicals continues.
On the medium-term outlook, the document highlighted that the demand for capital goods and key construction inputs like steel and cement is likely to be positive, whereas global uncertainties could dent the import-heavy industries.
Howis India’s services sector performing?
Noting the low-cost offerings of the Indian services sector historically, the Survey said that this trend has accelerated post-pandemic. It further noted that India’s services sector is expanding beyond the traditional offering of technology to Human Resources (HR), legal and design services, at par with global demand.
Saying that the country is emerging as a hub for Global Capability Centres, the document also highlighted that the post-production value addition in activities is also increasingly dependent on services like e-commerce, innovative packaging and advertising, and modern logistics.