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Economic Survey 2023-24 |
Introduction
- The Economic Survey 2023-24, presented by Union Finance Minister Nirmala Sitharaman, provides a comprehensive review of the Indian economy.
- Prepared by the Economics Division of the Department of Economic Affairs under the guidance of Chief Economic Advisor V. Anantha Nageswaran, the survey outlines key economic indicators and trends.
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UPSC Syllabus: Prelims: Economic and Social Development Mains: General Studies III: Government Budgeting |
What is an Economic Survey?
- The Economic Survey is an annual document released by the Government of India, providing a detailed analysis of the Indian economy in the previous financial year.
- It reviews major economic developments, highlights policy initiatives, and presents the economic outlook for the coming year.
- The Economic Survey is prepared and published by the Economics Division of the Department of Economic Affairs under the Ministry of Finance.
- This document is tabled in the Parliament a day before the Union Budget is presented by the Union Finance Minister.
Key Findings of Economic Survey 2023-24
Current Economic Situation in India
- The Indian economy is in a strong and stable position, showing resilience in the face of geopolitical challenges.
- The economy has ensured economic and financial stability post-Covid.
- To sustain the recovery, strong domestic growth is essential.
Global Issues
- Agreements on key global issues such as trade, investment, and climate have become exceptionally challenging, requiring reform.
GDP Growth
- India’s GDP is estimated to grow at 6.5 to 7% in the current financial year, lower than the growth rate of 8.2% estimated for the previous financial year (2023-24).
- Despite global challenges affecting exports, India remains focused on economic growth.
Fiscal Consolidation
Fiscal Deficit
- A fiscal deficit occurs when the government’s total expenditure exceeds its total revenue (excluding borrowings).
For FY23-24
Reduction: Fiscal deficit reduced from 6.4% of GDP in FY23 to 5.6% of GDP in FY24.
Significance: A reduction in fiscal deficit indicates better control over government spending and borrowing.
Capital Expenditure
- Capital expenditure (capex) is the funds used by a company to acquire, upgrade, and maintain physical assets such as property, plant, buildings, technology, or equipment.
For FY23-24:
Increase: Capital expenditure stood at ₹9.5 lakh crore, showing a year-on-year increase of 28.2%.
Significance: Increased capital expenditure boosts long-term economic growth by enhancing infrastructure and development.
Effective Capital Expenditure
- Effective capital expenditure includes capital expenditure as well as grant-in-aid for the construction of capital assets provided by the central government.
For FY23-24:
Increase: Effective capital expenditure increased to ₹12.5 lakh crore (4.2% of GDP) in FY24 from ₹10.5 lakh crore (3.9% of GDP) in FY23.
Significance: This indicates a prioritization of investment in development projects and infrastructure, boosting economic growth.
Foreign Sector
Foreign Exchange Reserves
For FY23-24:
- Foreign exchange reserves include foreign currencies held by the central bank, gold reserves, special drawing rights (SDRs), and reserve positions in the International Monetary Fund (IMF).
Indian Rupee
Status: In FY24, the Indian rupee was one of the least volatile currencies among its emerging market peers.
Significance: The stability of the Indian rupee boosts investor confidence and facilitates international trade.
External Debt
Status: As of March 2024, the external debt to GDP ratio was 18.7%.
Significance: A low external debt ratio indicates financial stability and low vulnerability to foreign economic fluctuations.
Remittances: Projected to grow at a rate of 3.7% to $124 billion in 2024, reaching $129 billion in 2025.
Agriculture and Inflation
Food Production
• Food production includes all types of cereals, vegetables, fruits, etc. produced by the country’s farms.
For FY 2023-24:
Production: Food grain production reached an all-time high of 329.7 million tonnes in 2022-23.
In 2023-24, it declined slightly to 328.8 million tonnes due to poor and delayed monsoon.
Importance: Stability in food production ensures food security and supports the rural economy.
Food Inflation
- Food inflation is the rate at which the prices of food products rise over time.
For FY2023-24:
Increase: According to the Consumer Food Price Index (CFPI), food inflation increased from 3.8% in FY2022 to 6.6% in FY2023 and 7.5% in FY2024.
Reason: Adverse weather conditions, such as excessive rainfall and drought, affected food production, leading to inflation.
Public Distribution
- The Public Distribution System (PDS) provides subsidized food grains to poor and needy citizens through government channels (shops).
For FY2023-24:
Distribution: Public distribution of food grains was 19.4% of net availability in FY2023, compared to 21.6% in FY2022.
Importance: PDS ensures food security for the poor and helps mitigate the impact of food inflation.
Inflation Control Measures
Retail Inflation
- Retail inflation refers to the increase in the prices of goods and services sold at the retail level, as measured by the Consumer Price Index (CPI).
For FY 2023-24:
Reduction: Retail inflation declined from an average of 6.7% in FY 2023 to 5.4% in FY 2024.
Significance: A reduction in retail inflation reflects a reduction in the cost of living and purchasing power stability for consumers.
Government Measures
LPG Price Reduction: The government reduced the prices of LPG cylinders to make cooking fuel more affordable to households.
Petrol and Diesel Price Cut: Petrol and diesel prices were reduced to reduce transportation costs and overall inflation.
Open Market Sales: The government conducted open market sales to release excess food grains and stabilize food prices.
RBI Policy Rate Hike: The Reserve Bank of India (RBI) increased policy rates to curb inflation by controlling the money supply and reducing consumer spending.
State-wise Inflation
State-wise Inflation Rates
Status: In FY 2023-24, 29 out of 36 states and union territories had inflation rates below 6%.
Comparison: This reflects a decline in the Indian average retail inflation rate as compared to the previous year (FY 2022-23).
Significance
Economic Stability: Low inflation rates in most states indicate economic stability and effective inflation control measures.
Consumer Impact: Low inflation benefits consumers by stabilizing prices and maintaining purchasing power.
Global Challenges and Foreign Direct Investment (FDI)
Challenge:
- The current global financial environment is not conducive to the growth of FDI in developing countries like India.
- High interest rates in developed countries have increased the funding cost and opportunity cost of investing in emerging markets.
Example: Authentic sources like World Bank or IMF reports can provide comparative data on FDI flows to substantiate these challenges.
Dependence on China
Challenge: India is highly dependent on imports from China, especially in sectors like renewable energy, which poses strategic and economic risks.
Example: Data from the Ministry of Commerce can be used to find out the percentage of solar panels and other renewable technologies imported from China.
Threat from Artificial Intelligence (AI)
Challenge: The rise of AI technology threatens traditional sectors like BPO and IT services, which have been key growth drivers for India.
Example: AI is expected to impact Indian IT job roles and services, according to a NASSCOM report.
Stagnant Private Investment
Challenge: Despite tax cuts aimed at boosting investment, private sector investment has not grown as expected. Corporate profits have jumped, but this has not led to a proportionate increase in hiring or salaries.
Example: Financial data from SEBI or corporate earnings reports that highlight the discrepancy between profit growth and employment or salary growth.
Data Deficiency
- The lack of high-quality, timely data, particularly relating to employment, hinders effective policy-making and economic analysis.
Lifestyle and Public Health
Challenge: Modern lifestyle choices relating to diet, physical activity, and the use of technology are adversely affecting public health and productivity.
Example: Health studies or surveys by the Indian Council of Medical Research (ICMR) that link lifestyle factors to health outcomes.
Promoting Job Creation in the Private Sector
Strategy: The government aims to reduce its role in the economy, encouraging the private sector to lead job creation efforts.
Example: Initiatives such as ‘Make in India’ which aim to boost manufacturing jobs by encouraging private investment in this sector.
Promoting Traditional Lifestyles
Strategy: Encouraging Indian businesses to adopt and promote traditional lifestyles and diets, which can cater to global markets demanding organic and natural products.
Example: Case studies of companies such as Patanjali, which have successfully marketed traditional Indian products domestically and internationally.
Revitalizing the Agriculture Sector
Strategy: Amidst global challenges in manufacturing and services, there is an emphasis on returning to agriculture-based industries, value addition, and increasing farmer incomes.
Example: Government policies such as the new Agriculture Export Policy which aims to increase agricultural exports and support farmer incomes through global market access.
Regulatory Reforms
Strategy: Reducing the regulatory burden on businesses, especially MSMEs, to promote entrepreneurship and economic activity without excessive government interference.
Example: Recent changes made by the government in the MSME definition to reduce compliance burden and promote growth.
State Capacity Building
Strategy: Shifting focus from key reforms to strengthening the administrative capacities of the state to effectively implement policies and ensure sustainable economic growth.
Example: Initiatives under the Digital India program to enhance the technological infrastructure of government operations to improve efficiency and service delivery.
Health and Education
- The Indian economy is moving forward from a well-being perspective.
Education Sector:
- The New Education Policy 2020 is bringing about a transformation, focusing on basic literacy and taking forward the ‘Poshan Bhi Padhai Bhi’ program to develop a high-quality preschool network in Anganwadi centers.
Healthcare:
- Ayushman Bharat is not only saving lives but also preventing generational debt.
- Over 34.7 crore Ayushman Bharat cards have been generated and the scheme covers 7.37 crore hospitals, saving poor and underprivileged families from spending over Rs 1.25 lakh crore out of their own pockets.
Employability and Skill Development
Youth Demographics: 65% of India’s fast-growing population is under the age of 35, but many of them lack the skills required for a modern economy.
Employable Youth: About 51.25% of youth are considered employable.
Skill improvement: The percentage of skilled youth has increased from about 34% to 51.3% in the last decade.
Job creation: To employ the growing human resources, 78.5 lakh jobs need to be created annually in the non-agricultural sector by 2030.
Livelihood importance: Economic growth is important not only for job creation but also for providing livelihood to more people.