Economic Survey: The government's report on India's economy

Key Points:

• The survey is a report on the state of the Indian economy in the financial year ending.
• It is prepared by the Department of Economic Affairs, Union Ministry of Finance under the guidance of the Chief Economic Advisor (CEA).

Finance Minister's presentation of Economic Survey 2024-25:

Presentation of the Survey:

• Finance Minister Nirmala Sitharaman tabled the Economic Survey for 2024-25 in Parliament.
• The survey outlines the current state of the Indian economy, prepared with reference to the financial year ending (2023-24).

Survey Preparation Process:

• The survey has been prepared under the guidance of the Chief Economic Advisor (CEA).
• The survey is compiled by the Department of Economic Affairs, Union Ministry of Finance, which analyses and evaluates various aspects of the Indian economy.

Global economy growth:

• The global economy grew at 3.3% in 2023.
• The IMF has projected global growth of 3.2% over the next five years.

Global economic sustainability:

• The global economy demonstrated sustainability in 2024 despite uneven growth across sectors.
• Manufacturing remained slow in Europe and some Asian countries due to supply chain disruptions and weak foreign demand.
• The services sector performed well, helping the economies of many countries.
• Inflation pressures were mild across most economies, but the services sector was affected by inflation.

India's economic growth:

• India's real GDP growth in 2024 was 6.4%, which is very close to the decadal average.
• India maintained sustained economic growth despite global uncertainty.

Aggregate demand:

• At constant prices, private final consumer spending is projected to grow by 7.3%.

Supply Side Growth:

• Real Value Added (GVA) projected to grow by 6.4%.
• Agricultural sector expected to grow by 3.8% in 2025.
• Industrial sector projected to grow by 6.2% in 2025.
• Strong growth expected in construction activities and electricity, gas, water supply, and other utility services sectors.

Services Sector Growth:

• Services sector projected to grow by 7.2%, led by rising activity in financial, real estate, professional services, public administration, defence, and other services.

FY26 Projection:

• Real GDP growth is projected to be between 6.3% and 6.8% in 2026.

Global Economic Concerns and Risks:

• Global concerns due to uncertainty in economic policies and trade policy.
• Emphasis on global factors and the importance of strengthening domestic growth drivers.

Medium Term Growth Outlook for India:

• India's medium term growth outlook should be assessed keeping in mind geo-economic fragmentation, China's manufacturing dominance, and dependence on China in energy transition to realize the dream of a developed India by 2047.
• Emphasis on India's internal resources and domestic drivers of growth:
• India needs to focus on reforms and economic policy to make the most of internal resources and promote lawful economic activities.

Freedom in business under easy rules:

• Reforms and reforms should be made in a systematic manner under "Ease of Doing Business 2.0" to provide business impetus to the SME sector.

Growth in the Agriculture Sector:

• The agriculture sector grew steadily in the first half of FY25.
• Kharif foodgrain production estimated at 1647.05 lakh metric tonnes, 8.2% higher than the average of the last 5 years.

Industrial sector growth:

• Industrial sector estimated to grow by 6.2% in FY25.
• While the first quarter saw 8.3% growth, the second quarter slowed down due to three major reasons:
• Weak global demand and stringent trade policies.
• Mixed impact of monsoon, which was beneficial for agriculture but detrimental for mining, construction, and manufacturing sectors.
• Festival season hampers growth.

Latest PMI manufacturing growth:

• India recorded sharp growth in manufacturing sector in PMI (Purchasing Managers Index).
• The PMI for December 2024 shows a positive trend in the expansionary sector.

Services sector growth:

• Services sector grew by 7.1% in FY25.
• Services exports grew by 12.8%, higher than the same period last year.

Stability on Inflation:

• Retail headline inflation declined from 5.4% to 4.9% (in April-December 2024).
• Increase in food inflation, especially vegetables and pulses, was the major contributor.
• According to RBI and IMF, inflation will be close to the target of 4% in FY26.

Capex:

• Capex saw an improvement from FY21 to FY24.
• After the general elections, the central government capex increased by 8.2% from July to November 2024.

Total Tax Revenue (GTR):

• GTR grew by 10.7% in April-November 2024, but the central government did not get any significant increase in revenue.
• States' OTR also saw a good increase. States' revenue expenditure grew by 12%, with subsidies and liabilities growing by 25.7% and 10.4%, respectively.

Banking Sector Performance:

• The banking sector demonstrated strong operations and capital.
• NPAs (non-performing assets) fell to a 12-year low of 2.6%.
• The CRAR (capital to risk asset ratio) of commercial banks was 16.7% as of September 2024, which is higher than normal.

India's Merchandise Exports:

• India's merchandise exports grew by 1.6% in April-December 2024.
• India's strong services export sector has given it the seventh-largest share in global services exports.

Rise in diaspora remittances:

• Remittances sent by Indian workers living abroad increased.
• India's fiscal deficit remained stable at 1.2% of gross domestic product (GDP) in the second quarter.

Rise in foreign investment:

• FDI (foreign direct investment) increased, recording a growth of 17.9% in the first eight months of 2024.
• Foreign exchange reserves rose from US$616.7 billion in January 2024 to US$704.9 billion by September 2024.

Employment and labour market:

• The labour market grew after the corona pandemic. The unemployment rate declined from 6% in 2017-18 to 3.2% in 2023-24.
• The adoption of AI (artificial intelligence) in the labour sector is expected to increase productivity and the quality of the workforce.

Growth in Infrastructure:

• Railway network expanded, adding 2031 km of network and adding 17 new Vande Bharat trains.
• Port capacity increased and container turn-around time reduced (from 48.1 hours to 30.4 hours).

Infrastructure Investment:

• High investment in infrastructure needs to be maintained for the next two decades to drive growth and performance.