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.