Why in news?
Economic Survey 2023-24 was tabled in Parliament by Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman.
What’s in today’s article?
- Economic Survey
- Key highlights of Economic Survey 2023-24
Economic Survey
- About
- The Economic Survey of India is an annual report released by the Finance Ministry. It details the state of the economic performance of the country in the past year.
- The survey highlights macroeconomic figures and economic progress of the country.
- It also mentions the possible economic challenges that India might face in future and suggests measures to overcome them.
- Preparations and presented by
- The survey is prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance under the supervision of the Chief Economic Advisor of India (CEA).
- It is presented every year a day before the Union Budget is announced.
- The first Economic Survey was presented for 1950-51 and until 1964, it was presented along with the Budget.
- Significance
- Even though it comes just a day before the Budget, the assessment and recommendations carried out in the survey are not binding on the Budget.
- However, the survey remains the most authoritative and comprehensive analysis of the economy that is conducted from within the Union government.
Key highlights from Economic Survey 2023-24
- India’s economy – steady as she goes
- The Survey conservatively projects a real GDP growth of 6.5–7 per cent, with risks evenly balanced.
- India's real GDP grew by 8.2 per cent in FY24, exceeding 8 per cent mark in three out of four quarters of FY24.
- On supply side, Gross value added (GVA) grew by 7.2 per cent in FY24 (at 2011-12 prices) and net taxes at constant prices grew by 19.1 per cent in FY24.
- The retail inflation reduced from 6.7 per cent in FY23 to 5.4 per cent in FY24.
- Current Account Deficit (CAD) stood at 0.7 per cent of the GDP during FY24, an improvement from the deficit of 2.0 per cent of GDP in FY23.
- 55% of tax collected accrued from direct taxes and remaining 45% from indirect taxes.
- Government has been able to ensure free food grains to 81.4 Crore people. Total expenditure allotted to capital spending have progressively enhanced.
- Monetary Management and Financial Intermediation- Stability is the Watchword
- Credit disbursal by Scheduled Commercial Banks (SCBs) stood at ₹164.3 lakh crore, growing by 20.2 per cent at the end of March 2024.
- Agriculture and allied activities witnessed double digits growth in credit during FY24.
- Industrial credit growth was 8.5 per cent compared to 5.2 per cent a year ago.
- Primary capital markets facilitated capital formation of ₹10.9 lakh crore during FY24 (approximately 29 per cent of the gross fixed capital formation of private and public corporates during FY23).
- Financial inclusion is not just a goal but also an enabler for sustainable economic growth, reduction of inequality and elimination of poverty.
- The next big challenge is Digital Financial Inclusion (DFI).
- India poised to emerge as one of the fastest-growing insurance markets in the coming decade.
- Indian microfinance sector emerges as the second largest in the world after China.
- Prices and Inflation- Under Control
- The survey highlights that the inflation rate was stable, reflecting effective monetary policy management.
- Central Government announced price cuts for LPG, petrol, and diesel. As a result, retail fuel inflation stayed low in FY24.
- In August 2023, the price of domestic LPG cylinders was reduced by ₹200 per cylinder across all markets in India. Since then, LPG inflation has been in the deflationary zone.
- Core services inflation eased to a nine-year low in FY24; at the same time, core goods inflation also declined to a four-year low.
- In FY24, core consumer durables inflation declined due to an improved supply of key input materials to industries.
- Agriculture sector faced challenges due to extreme weather events, depleted reservoirs, and crop damage, which impacted farm output and food prices.
- Food inflation stood at 6.6 per cent in FY23 and increased to 7.5 per cent in FY24.
- Government took appropriate administrative actions, including dynamic stock management, open market operations, subsidised provision of essential food items and trade policy measures, which helping to mitigate food inflation.
- The survey emphasizes the need for targeted interventions to manage food prices effectively.
- It makes a case for changing the inflation targeting framework of the central bank by excluding food inflation.
- External Sector - Stability Amid Plenty
- India’s external sector remained strong amidst on-going geopolitical headwinds accompanied by sticky inflation.
- India’s rank in the World Bank’s Logistics Performance Index improved by six places, from 44th in 2018 to 38th in 2023, out of 139 countries.
- The moderation in merchandise imports and rising services exports have improved India’s current account deficit which narrowed 0.7 per cent in FY24.
- India is gaining market share in global exports of goods and services.
- Its share in global goods exports was 1.8 per cent in FY24, against an average of 1.7 per cent during FY16-FY20.
- India’s services exports grew by 4.9 per cent to USD 341.1 billion in FY24, with growth largely driven by IT/software services and ‘other’ business services.
- India is the top remittance recipient country globally, with remittances reaching a milestone of USD 120 billion in 2023.
- India’s external debt has been sustainable over the years, with the external debt to GDP ratio standing at 18.7 per cent at the end of March 2024.
- Medium-Term Outlook – A Growth Strategy for New India
- Key areas of policy focus in the short to medium term:
- job and skill creation,
- tapping the full potential of the agriculture sector,
- addressing MSME bottlenecks,
- managing India’s green transition,
- deftly dealing with the Chinese conundrum,
- deepening the corporate bond market,
- tackling inequality and improving our young population’s quality of health.
- Amrit Kaal’s growth strategy based on six key areas:
- boosting private investment,
- expansion of MSMEs,
- agriculture as growth engine,
- financing green transition,
- bridging education-employment gap, and
- building capacity of States.
- For Indian economy to grow at 7 per cent plus, a tripartite compact between the Union Government, State Governments and the private sector is required.