On July 22, Union Finance Minister Nirmala Sitharaman presented the Economic Survey in Parliament, providing a comprehensive overview of India’s economic performance in the fiscal year 2023-24 (FY24). Despite global challenges, the Indian economy showcased remarkable resilience and growth. Here are the key highlights and insights from the Economic Survey, reflecting on the factors driving this impressive performance and the future outlook.
- Robust Economic Growth: The Indian economy continued its robust growth trajectory, recording a real GDP growth of 8.2% in FY24. This marks the third consecutive year of over 7% growth, driven by stable consumption demand and steadily improving investment demand. The Gross Value Added (GVA) at 2011-12 prices grew by 7.2%, with growth remaining broad-based across sectors. Strong tax growth at both central and state levels, coupled with rationalisation of subsidy expenditure, contributed to the positive difference between GDP and GVA growth.
- Strengthened External Position: India’s current account deficit (CAD) for FY24 stood at 0.7% of GDP, a significant improvement from the 2.0% deficit in FY23. The country’s forex reserves at the end of March 2024 were sufficient to cover more than 10 months of projected imports for FY25 and 98% of its external debt. With an external debt-to-GDP ratio of 18.7%, India’s external debt has remained sustainable. The focus on maintaining macroeconomic stability ensured minimal impact from external challenges on the economy.
- Fiscal Discipline and Digitisation: The fiscal balances of the general government showed progressive improvement despite expansionary public investment. Tax compliance gains, driven by procedural reforms, expenditure restraint, and increasing digitisation, helped achieve a fine balance. This fiscal discipline underscores the government’s commitment to sustainable economic management.
- Stable Banking Sector: India’s banking and financial sectors demonstrated stellar performance in FY24. Double-digit, broad-based growth in bank credit, multi-year lows in gross and net non-performing assets, and improved bank asset quality highlighted the sector’s health and stability. Primary capital markets facilitated capital formation of ₹10.9 lakh crore during FY24, contributing significantly to private and public corporate investments. The market capitalisation of the Indian stock market surged, with the market capitalisation-to-GDP ratio ranking fifth globally.
- Inflation Dynamics: Government policy interventions and the Reserve Bank of India’s measures maintained retail inflation at 5.4% in FY24, the lowest since the pandemic. Core services inflation eased to a nine-year low, while core goods inflation declined to a four-year low. However, food inflation remained a concern due to extreme weather events, depleted reservoirs, and crop damage, rising from 6.6% in FY23 to 7.5% in FY24.
- Positive Inflation Outlook: The survey projects a positive short-term outlook for inflation, anticipating a decline due to normal monsoon conditions and the absence of external policy shocks. The RBI forecasts inflation to fall to 4.5% in FY25 and 4.1% in FY26. Similarly, the IMF and World Bank predict lower inflation driven by declining global commodity prices, which will help ease domestic inflation pressures.
- Strategic Growth Initiatives: The survey emphasises the need for a new growth strategy for India, focusing on bottom-up reforms and strengthening governance. Key areas for immediate focus include job and skill creation, unlocking the potential of the agriculture sector, addressing MSME bottlenecks, managing the green transition, deepening the corporate bond market, tackling inequality, and improving young population health. The growth strategy for the Amrit Kaal is predicated on boosting private investment, expanding MSMEs, recognising agriculture as a future growth engine, securing green transition financing, bridging the education-employment gap, and enhancing state capacity.
- FDI Inflows and Global Trends: Foreign direct investment (FDI) inflows slowed in FY24, influenced by weakening global growth prospects, economic fracturing trends, trade and geopolitical tensions, and supply chain diversification. Net FDI inflows to India declined from $42 billion in FY23 to $26.5 billion in FY24, though gross FDI inflows moderated only slightly. This cautious approach by multinational enterprises reflects broader global economic uncertainties.
- Energy Needs and Climate Action: India’s energy needs are expected to grow 2 to 2.5 times by 2047, aligning with its developmental priorities and aspirations. The pace of energy transition must balance alternative demands for resilience to climate change and sustained socio-economic development. As of May 31, 2024, non-fossil sources constituted 45.4% of the installed electricity generation capacity. India reduced its GDP emission intensity by 33% from 2005 levels by 2019, showcasing remarkable progress in climate action.
- Employment and Skill Development: Indian labour market indicators improved over the past six years, with the unemployment rate declining to 3.2% in 2022-23. Net payroll additions under the Employees’ Provident Fund Organisation (EPFO) more than doubled in the past five years, indicating healthy growth in formal employment. The rise of artificial intelligence necessitates guiding technological choices to benefit everyone and balancing technology use with employment. Government measures to boost employment, foster self-employment, and promote worker welfare have been significant, with increasing numbers of candidates undergoing skill development under flagship programs.
- Sectoral Performance: The agriculture and food management sector registered an average annual growth rate of 4.18% at constant prices over the last five years. Industrial growth reached 9.5% in FY24, with manufacturing and construction nearing double-digit growth. Mining, quarrying, electricity, and water supply also experienced significant positive growth. The services sector continued to be a major contributor, accounting for about 55% of the total economy size in FY24.