Economic Survey, 2023-24 – An Overview

On 23rd July, 2024, ahead of the Union Budget 2024-25, the economic survey was tabled in Parliament. The Finance minister stated, “India is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges”. In this article, we are going to see what the economic Survey is, Why it matters and an overview of the Economic Survey 2023-24.  Let us delve into the topic now

What is the Economic Survey and Why does it matter?

The Economic Survey is an annual document which highlights and examines the efforts of the government in the previous years; it also provides an outlook for the present fiscal year.

The Economic Survey provides the performance of the economy, growth prospects, challenges faced by the government and policy of the government to address these challenges.

The Economic Survey (ES) helps to understand how the economy did last Fiscal Year (FY) and what are the efforts taken by the Government to tackle challenges which the economy faced during the previous FY.

The ES report is prepared by the Economic Division, Department of Economic Affairs, which is under the Ministry of Finance. It is prepared under the chairmanship of the Chief Economic Advisor of India.  It is placed in the parliament one day before the Union Budget.

An Overview of the Economic Survey 2023-24

The Economic Survey 2023-24 focuses on the state of the economy, monetary management, financial intermediation, prices and inflation, and other key sectors.

The ES 2023-24 has 13 chapters. They are

  1. State of the economy: steady as she goes
  2. Monetary management and the financial intermediation: stability is the watchword
  3. Prices and inflation: under control
  4. External sector: stability amid plenty
  5. Medium-term outlook: a growth strategy for New India
  6. Climate change and energy transition: dealing with trade-offs
  7. Social sector: benefits that empower
  8. Employment and skill development: towards quality
  9. Agriculture and food management: plenty of upside left if we get it right
  10. Industry: small and medium matters
  11. Services: fuelling growth opportunities
  12. Infrastructure: lifting potential growth
  13. Climate change and India: a look through our lens

It would be too comprehensive to discuss all 13 chapters in one single article. Therefore, we will see only major and important highlights of the Economic Survey here.

GDP Growth and Projection

Despite many global and external challenges, India’s Real Gross Domestic Product (GDP) grew by 8.2% in FY24, posting growth of over 7% for the third consecutive year. Thanks to stable consumption demand and steadily improving investment demand that made it possible.

On the Supply Side, the Gross Value Added (GVA) at constant prices (i.e. 2011-12 prices) increased by 7.2% in FY24. Net taxes at constant (2011-12) prices increased by 19.1% in FY24, which led to the differences between GDP and GVA growth in FY24.

GDP

ES report conservatively projects that India’s economy (i.e. GDP) to grow at 6.5 to 7% in the FY25. It is to be remembered that this is below the Reserve Bank of India’s projection of 7.2% and last year’s GDP growth of 8.2%.

Monetary management

The Monetary Policy Committee (MPC) kept the policy repo rate at status quo of 6.5% in FY24. The stance focused on withdrawing accommodation to ensure that inflation slowly aligns with the policy target. MPC’s stance ensured to keep inflation low and supported economic activity.

Agricultural Credit had increased nearly 1.5 times from Rs. 13.3 Lakh core in FY21 to Rs. 20.7 lakh core in FY24. Overall Credit to Agriculture and allied activities was in double digits in FY24. In April and May 2024, the bank credit to agriculture and allied activities grew by 19.7% and 21.6% (Year on Year) respectively.

In the second half of FY24 (i.e. H2 of FY24), the industrial growth picked up registering an 8.5% growth in March 2024,  in comparison with 5.2% last year. This is driven by an increase in bank credit to small and large industries.

From its peak of 11.2% in FY18, the Gross Non-performing Assets (GNPA) ratio of Scheduled Commerical Banks (SCBs) continued its downward trend by reaching a 12-year low of 2.8% at the end of March 2024.

The Credit to the private sector as a percentage of GDP has increased from 50.6% in 2020 to 54.7% in 2021.

Inflation

The retail inflation declined to 5.4% in FY24, after averaging 6.7% in FY23. India has effectively managed inflationary pressures with the combination of measures taken by the RBI and the Government. The RBI has raised its policy rates, between May 2022 to February 2023, by a cumulative 250 basis points. The policy measures helped to reduce the core inflation to 3.1% – reaching a four-year low in Core Goods and a Nine-year low in Core Services inflation.

Inflation

However, the report noted that the food inflation has increased from 6.6% in FY23 to 7.5% in FY24. The report states that this is due to crop damage which occurred because of extreme weather conditions.

Despite the food inflation, India was the only country amongst its peers to traverse low inflation and high growth for the period of FY22-FY24.

RBI expects that assuming normal monsoons and no further external or policy shocks, headline inflation to be 4.5% in FY25 and 4.1% in FY26.

External Sector

India’s trade openness indicator has increased from 37.5% in FY05 to 45.9% in FY24. Trade has contributed significantly to economic growth as it has helped an efficient allocation of resources through comparative advantage.

The Share of Trade (excluding petroleum products exports and crude oil imports) as a percentage of GDP increased from 32.3% in FY05 to 40.8% in FY23.

The External debt to GDP ratio has declined from 19.0% at the end of March 2023 to 18.7%  at the end of March 2024.

India’s Current Account Deficit (CAD) has declined to 0.7% in 2023-24 in comparison with 2.0% of the GDP last year.

Conclusion

The survey also discusses various sectors like infrastructure, services etc.., and climate change.  It has also discussed about employment and skill development. The Survey argued that the Indian state to free up its capacity and enhance its capability to focus on areas which need its attention. The survey stated that it felt the burden of the small and medium enterprises and ensured to resolve it. These are the major highlights of the economic survey 2023-24. 

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