Major Highlights of Economic Survey 2024
Indian economy grew over 7% for the 3rd year
The Indian economy remained resilient amid global challenges, growing over 7% for the third consecutive year due to stable consumption and improving investment demand. Gross Value Added (GVA) at 2011-12 prices grew by 7.2% in FY24, with broad-based growth. Net taxes at constant prices grew by 19.1%, driven by strong tax growth at both central and state levels and rationalisation of subsidy expenditure. This accounted for the difference between GDP and GVA growth in FY24.
India’s current account deficit (CAD) improved to 0.7% of GDP in FY24 from 2.0% in FY23. By March 2024, forex reserves covered over 10 months of projected FY25 imports and 98% of external debt. The external debt-to-GDP ratio was 18.7%. Macroeconomic stability minimized external challenges. General government fiscal balances improved despite increased public investment, aided by tax compliance, procedural reforms, expenditure restraint, and digitization. Healthier corporate and bank balance sheets are expected to boost private investment, with strong growth prospects for FY25, pending geopolitical, financial market, and climatic risks.
Stable Banking Sector
The survey highlighted India’s banking and financial sectors’ stellar performance in FY24. Primary capital markets facilitated ₹10.9 lakh crore in capital formation, about 29% of the gross fixed capital formation of private and public corporates in FY23. The Indian stock market’s market capitalization surged, making its market capitalization-to-GDP ratio the fifth largest globally.
Core inflation falls significantly
The survey noted that timely government policies and RBI’s price stability measures kept retail inflation at 5.4%, the lowest since the pandemic, due to a drop in core inflation for goods and services. Core services inflation hit a nine-year low, while core goods inflation fell to a four-year low in FY24.
Increasing Food inflation
The survey highlighted global concerns over food inflation, with India’s agriculture sector facing challenges from extreme weather, depleted reservoirs, and crop damage. Food inflation in India rose from 6.6% in FY23 to 7.5% in FY24.
Meanwhile, survey anticipates a short-term decrease in inflation due to a normal monsoon and the lack of external policy shocks.
The survey stated that the RBI projects inflation to decrease to 4.5% in FY25 and 4.1% in FY26, assuming normal monsoons and no external or policy shocks. The IMF similarly forecasts India’s inflation at 4.6% in 2024 and 4.2% in 2025. Additionally, the World Bank predicts declining global commodity prices in 2024 and 2025, driven by lower energy, food, and fertilizer prices, which could help reduce domestic inflation in India.
Necessity of new approach
The survey emphasized the need to prioritize job and skill creation in the short to medium term.
For Amrit Kaal, the growth strategy focuses on six key areas:
1. Deliberately boosting private investment.
2. Strategically prioritizing the growth of MSMEs.
3. Recognizing agriculture’s potential as a growth engine and removing policy barriers.
4. Securing financing for India’s green transition.
5. Bridging the education-employment gap.
6. Building state capacity and capability to sustain and accelerate progress.
FDI inflows slow
The survey also noted a slowdown in foreign direct investment (FDI) inflows. Factors such as weakening growth prospects, economic fragmentation, geopolitical tensions, industrial policies, and supply chain diversification are causing multinational enterprises to be cautious about overseas expansion. Net FDI inflows to India dropped from $42 billion in FY23 to $26.5 billion in FY24, while gross FDI inflows decreased slightly from $71.4 billion in FY23 to just under $71 billion in FY24.
Energy sector needs to grow
The survey projects that India’s energy needs will grow 2 to 2.5 times by 2047 to support its economic development. It noted remarkable progress in climate action through increased renewable energy capacity and improved energy efficiency. As of May 31, 2024, non-fossil sources constitute 45.4% of India’s installed electricity generation capacity. Additionally, the country reduced its GDP emission intensity by 33% from 2005 levels by 2019.
In conclusion, the survey paints a robust picture of India’s economy, highlighting strong growth, improved macroeconomic stability, and a resilient banking sector amid global challenges. Key areas of focus such as job and skill creation, private investment, and MSME growth are essential for sustaining progress. While inflation and food prices pose challenges, effective policy measures and promising projections from the RBI, IMF, and World Bank offer a positive outlook. Energy needs and climate action remain crucial, with significant strides made in renewable energy and emission reductions. Addressing these areas will be vital for India’s continued economic development and resilience.
