Economic Survey - Drishti IAS
State of the Economy
Real GDP Growth: India’s real GDP grew by 8.2% in FY24, surpassing the 8% mark in three out of four quarters of FY24.
Retail Inflation: Retail inflation decreased from 6.7% in FY23 to 5.4% in FY24.
Current Account Deficit (CAD): The CAD improved to 0.7% of GDP in FY24 from 2.0% in FY23.
Tax Revenue: Direct taxes contributed 55% of the total tax revenue, with indirect taxes making up the remaining 45%.
Capital Spending: The government progressively increased capital expenditure and provided free food grains to 81.4 crore people.
Monetary Management and Financial Intermediation
Stability is the Watchword
Monetary Policy: The RBI maintained a steady policy repo rate at 6.5% throughout FY24.
Consequently, Core inflation declined by around 4% from April 2022 to June 2024.
Credit Growth: Credit disbursal by Scheduled Commercial Banks (SCBs) reached Rs 164.3 lakh crore, growing by 20.2% by March 2024.
Banking Sector: Gross and net non-performing assets are at multi-year lows, and bank asset quality has improved.
Data from the RBI’s Financial Stability Report of June 2024 show that the asset quality of SCBs has improved, with the Gross Non-Performing Assets (GNPA) ratio declining to 2.8% in March 2024, a 12-year low.
Insolvency and Bankruptcy Code has been recognised as an effective solution for the twin balance sheet problem, in the last 8 years, 31,394 corporate debtors involving a value of Rs 13.9 Lakh Crore have been disposed off as of March 2024.
The Twin Balance Sheet Problem refers to heavily indebted corporations and banks burdened with bad loans, creating a vicious cycle hindering economic growth.
Capital Markets: Primary capital markets facilitated capital formation of Rs 10.9 lakh crore, approximately 29% of the gross fixed capital formation of private and public corporates in FY23.
Insurance and Microfinance: India is poised to become one of the fastest-growing insurance markets and has the second-largest microfinance sector globally.
Prices and Inflation
Under Control
29 States and Union Territories recorded inflation below 6% in FY24.
Core services inflation eased to a nine-year low in FY24
Food inflation increased from 6.6% in FY23 to 7.5% in FY24.
Price cuts on LPG, petrol, and diesel helped in keeping retail fuel inflation relatively low.
Future Projections: The RBI forecasts inflation to decline to 4.5% in FY25 and 4.1% in FY26.
External Sector
Stability Amid Plenty
Exports
India’s services exports grew by 4.9% to USD 341.1 billion in FY24, with significant contributions from IT/software and other business services.
Remittances
India remains the top global recipient, with remittances totalling USD 120 billion in 2023.
External Debt
India’s external debt to a GDP ratio stood at 18.7% as of March 2024.
Logistics Performance
India's rank in the World Bank Logistics Index improved to 38th in 2023 from 44th in 2014.
Tourism
India’s share in world tourism receipts increased from 1.38% in 2021 to 1.58% in 2022.
Medium-Term Outlook
A Growth Strategy for New India
Growth Strategy
To sustain a 7%+ growth rate, a tripartite compact between the Union Government, State Governments, and the private sector is required.
Key Focus Areas
Job and skill creation, agriculture, MSME bottlenecks, green transition, and addressing the education-employment gap are crucial for medium-term growth.
Climate Change and Energy Transition
Dealing with Trade-Offs
Renewable EnergyAs of May 2024, non-fossil sources accounted for 45.4% of installed electricity generation capacity.
Energy NeedsIndia’s energy needs are projected to grow 2 to 2.5 times by 2047.
Investment in Clean EnergyThe clean energy sector attracted investments of Rs 8.5 lakh crore between 2014 and 2023.
Social Sector
Benefits that Empower
Welfare ExpenditureGrew at a CAGR of 12.8% between FY18 and FY24.
HealthcareOver 34.7 crore Ayushman Bharat cards have been issued.
Housing2.63 crore houses constructed under PM-AWAS-Gramin in the past 9 years.
Rural Infrastructure 15.14 lakh km of roads constructed under the Gram Sadak Yojana since 2014–15.
Employment and Skill Development
Towards Quality
The Unemployment Rate Declined to 3.2% in 2022–23.
Net payroll additions under the Employees' Provident Fund Organisation (EPFO) have more than doubled to 13.15 million in the past five years, indicating robust growth in formal employment.
Youth UnemploymentFell from 17.8% in 2017–18 to 10% in 2022–23.
Female Labor Force ParticipationRising for six consecutive years (37.0% currently).
Gig EconomyWorkforce expected to reach 2.35 crore by 2029–30.
Agriculture and Food Management
Agricultural GrowthThe sector registered an average annual growth rate of 4.18% at constant prices over the last five years.
Credit and Micro IrrigationCredit disbursed to agriculture amounted to Rs 22.84 lakh crore.
Ninety lakh hectares covered under micro-irrigation since 2015–16.
Kisan Credit Cards7.5 crore cards issued with a Rs 9.4 lakh crore limit.
Industry
Small and Medium Matters Industrial GrowthEconomic growth of 8.2% in FY24 is supported by an industrial growth rate of 9.5%.
Pharmaceutical and Clothing SectorsIndia’s pharmaceutical market is the world’s third-largest by volume, valued at USD 50 billion.
It is the second-largest clothing manufacturer globally, with textile and apparel exports reaching Rs 2.97 lakh crore in FY24.
Electronics ManufacturingIndia’s electronics sector accounts for an estimated 3.7% of the global market share.
Domestic production increased to Rs 8.22 lakh crore, with exports rising to Rs 1.9 lakh crore in FY23.
Services
Fuelling Growth Opportunities Sector ContributionThe service sector accounted for 55% of the economy in FY24 and grew by 7.6% during the year.
Digital ServicesIndia's share in global digitally delivered services exports increased to 6% in 2023.
Globally, India’s services exports constituted 4.4% of the world's commercial services exports in 2022 & accounted for 44% of India’s total exports in FY24.
Aviation: 15% YoY increase in total air passengers in FY24.
E-commerceExpected to cross USD 350 billion by 2030.
Start-upsIncreased from around 2,000 in 2014 to approximately 31,000 in 2023.
Infrastructure
Lifting Potential Growth National HighwaysThe pace of National Highways construction increased from 11.7 km per day in FY14 to approximately 34 km per day by FY24.
RailwaysCapital expenditure on Railways increased by 77% over the past five years.
Aviation21 new airport terminal buildings operationalised in FY24.
LogisticsRank in the International Shipments category improved to 22nd in 2023 from 44th in 2014.
SpaceIndia has 55 active space assets, including 18 communication, 9 navigation, 5 scientific, 3 meteorological, and 20 earth observation satellites.
Digital InfrastructureThe DigiLocker platform has over 26.28 crore registered users and over 674 crore issued documents.
TelecommunicationThe overall teledensity (number of telephones per 100 people) in India increased from 75.2% in March 2014 to 85.7% in March 2024.
The internet density also increased to 68.2% in March 2024.
Climate Change and India
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 emphasises a harmonious relationship with nature, in contrast to the culture of overconsumption in other parts of the developed world.
Shifting towards ‘traditional multi-generational households’ could pave the way towards sustainable housing.
“Mission LiFE” focuses on human-nature harmony, promoting mindful consumption rather than the overconsumption that lies at the root of the global climate change problem.