New Delhi: Union Finance Minister Nirmala Sitharaman on Monday presented the Economic Survey 2023-24, along with the statistical appendix in the Lok Sabha. The Economic Survey is an annual document presented by the government ahead of the Union Budget to review the state of the economy.
The document also provides an overview of the short-to-medium-term prospects of the economy. The Economic 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 adviser.
The first Economic Survey came into existence in 1950-51 when it used to be a part of the budget documents. In the 1960s, it was separated from the Union Budget and tabled a day before the presentation of the Budget.
Here are some of its highlights:
Global economic growth has been 3.2 per cent in 2023 as per the April World Economic Outlook. Diverging growth patterns have emerged among countries.
The stark difference in the growth performance of countries has been on account of domestic structural issues, uneven exposure to geopolitical conflicts and the impact of monetary policy tightening.
India’s economy carried forward the momentum it built in FY23 into FY24 despite a gamut of external challenges. 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. The focus on maintaining macroeconomic stability ensured that external challenges had minimal impact on India’s economy.
The Government’s thrust on capex and sustained momentum in private investment has boosted capital formation growth. Gross Fixed Capital Formation increased by 9 per cent in real terms in 2023-24. Moving forward, healthier corporate and bank balance sheets will further strengthen private investment. The positive trends in residential real estate market indicate that the household sector capital formation is increasing significantly. Inflationary pressures stoked by global troubles, supply chain disruptions, and vagaries of monsoons have been deftly managed by administrative and monetary policy responses. As a result, after averaging 6.7 per cent in FY23, retail inflation declined to 5.4 per cent in FY24.
The fiscal balances of the general government have improved progressively despite expansionary public investment. Tax compliance gains driven by procedural reforms, expenditure restraint, and increasing digitisation helped India achieve this fine balance.
The external balance has been pressured by subdued global demand for goods, but strong services exports largely counterbalanced this. As a result, 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. Indian economy has recovered and expanded in an orderly fashion post pandemic.
The real GDP in FY24 was 20 per cent higher than its level in FY20, a feat that only a very few major economies achieved. Prospects for continued strong growth in FY25 beyond look good, subject to geopolitical, financial market and climatic risks.
Inflation moderated in FY24
During FY22 and FY23, the COVID-19 pandemic, geopolitical tensions, and supply disruptions contributed to rising inflationary pressures globally. In India, consumer goods and services faced price hikes due to international conflicts and adverse weather conditions impacting food costs. However, in FY24, the Central Government’s timely policy interventions and the Reserve Bank of India’s price stability measures helped maintain retail inflation at 5.4 per cent - the lowest level since the pandemic.
Core inflation declined to 4-years low
The decrease in retail inflation in FY24 was driven by a fall in core inflation - both goods and services. 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. This was a welcome change after the progressive increase in consumer durables inflation between FY20 and FY23.
Food prices are under pressure due to adverse weather conditions
Food inflation has been a global concern over the past two years. Within India, the agriculture sector faced challenges due to extreme weather events, depleted reservoirs, and crop damage, which impacted farm output and food prices.
Consequently, food inflation stood at 6.6 per cent in FY23 and increased to 7.5 per cent in FY24. Unfavorable weather conditions in FY24 constrained food production. Tomato prices rose due to region-specific crop disease, early monsoon rains, and logistical disruptions. Onion prices spiked because of rainfall during the last harvest season affecting rabi onion quality, delayed sowing of Kharif onion, prolonged dry spells impacting Kharif production, and trade-related measures by other countries. Higher inflation in States correlated with a wider rural-to-urban inflation gap In FY24, most States and Union Territories witnessed decreased inflation rates, with 29 out of 36 recording rates below 6 per cent - consistent with the overall decline in all-India average retail inflation compared to FY23.
States with elevated food prices tend to experience higher rural inflation due to the greater weightage of food items in the rural consumption basket. Additionally, inter-state variation in inflation is more pronounced in rural areas than urban areas.
Banking and Financial Sector Performance India’s banking and financial sectors showcased strong performance in FY24
Bank credit growth was broad-based and double-digit. Gross and net non-performing assets (NPAs) reached multi-year lows. Improved bank asset quality reflects the government’s commitment to a stable banking sector. Capital Formation Primary capital markets facilitated capital formation of ₹10.9 lakh crore in FY24. This amount is approximately 29% of the gross fixed capital formation by private and public corporates in FY23.
Stock market performance
The market capitalisation of the Indian stock market surged significantly. India’s market capitalisation to GDP ratio is the fifth largest globally. Financial Inclusion Strategy: The strategy focuses on a target-based approach, market development, infrastructure strengthening, innovation, technology, last-mile delivery, consumer protection, and financial literacy. Emphasis is placed on using accounts for direct benefit transfers and promoting digital payments through RuPay cards and UPI.
Budget Presentation Day On July 23, 2024, the Finance Minister will present the Union Budget in the Lok Sabha at 11 am. The budget speech will cover fiscal policies, revenue and expenditure proposals, and significant announcements. The Budget will then undergo detailed debate in both houses of Parliament before approval and implementation. Pre-Budget Rituals The presentation of the Budget involves several traditional steps.
On the morning of Budget day, the Finance Minister will meet with the secretaries of her ministry at the North Block, followed by a visit to the President's residence for permission. A Cabinet meeting, led by the Prime Minister, will also take place to brief ministers and secure Cabinet approval.
The upcoming Union Budget, the first major policy announcement of Prime Minister Narendra Modi's third term, is eagerly anticipated. It will address critical issues like unemployment and economic stability while providing a roadmap for India's future economic growth. The Economic Survey and subsequent Budget presentation will set the stage for the nation's financial trajectory in the coming years.
