Economic Survey 2024-25

Context:

The Economic Survey 2024-25, presented by Union Finance Minister Nirmala Sitharaman, provides a comprehensive review of India's economic performance and projections for the future.

Highlights of the economic survey:

State of the Economy:

• GDP Growth: India's real GDP growth is estimated at 6.4% for FY25, in line with its decadal average.
• Global Context: The global GDP grew 3.3% in 2023, surpassing the IMF forecast of 3.2%. India’s FY26 GDP growth is projected to range between 6.3% and 6.8%.
• Retail Inflation: Reduced to 4.9% in FY25 (April-Dec), with projections of inflation aligning around 4% by FY26.

Monetary and Financial Sector Developments:

• Bank Credit: Steady growth in bank credit, with improved asset quality and profitability.
• Non-performing Assets (NPAs): GNPAs decreased to 2.6% of gross loans, the lowest in 12 years.
• Stock Market: Indian stock markets outperformed emerging market peers.
• Primary Market: ₹11.1 lakh crore mobilized from primary markets in FY25.
• Insurance and Pension: Insurance premiums grew 7.7%, and the pension sector saw a 16% rise in subscribers.

External Sector:

• Exports: Exports grew by 6%, with services exports increasing by 11.6% (April-Dec FY25).
• FDI: Foreign Direct Investment inflows surged by 17.9% YoY to USD 55.6 billion in FY25.
• Forex Reserves: India’s forex reserves stood at USD 640.3 billion, covering 10.9 months of imports.

Investment and Infrastructure:

• Capital Expenditure (CAPEX): Government CAPEX grew by 38.8% from FY20 to FY24.
• National Highways: 5853 km of national highways constructed in FY25.
• Renewable Energy: India’s renewable energy capacity grew by 15.8% YoY by Dec 2024.
• Infrastructure: Major projects in metro expansion, rural electricity access, and other significant infrastructure developments.

Industry:

• Industrial Growth: Projected at 6.2% in FY25, primarily driven by the electricity and construction sectors.
• Automobile Sales: Increased by 12.5% in FY24.
• MSMEs: Strong growth of the Micro, Small, and Medium Enterprises (MSME) sector, with initiatives like the Self-Reliant India Fund.

Services:

• Contribution to GDP: The services sector contributed 55.3% to Gross Value Added (GVA) in FY25.
• Exports: Services exports grew by 12.8% in FY25.
• Railways and Tourism: Significant growth in both sectors.

Agriculture and Food Management:

• Agriculture’s Contribution: Contributed 16% to GDP in FY24.
• Kharif Production: 89.37 LMT increase in Kharif foodgrain production expected in FY24.
• MSP Increases: MSPs for Arhar and Bajra increased by 59% and 77%, respectively.

Climate & Environment:

• Non-Fossil Fuel Power: Non-fossil fuel power generation capacity reached 46.8% of total capacity.
• LiFE Initiative: India’s LiFE (Lifestyle for Environment) initiative could save USD 440 billion globally by 2030.
• Carbon Sink: India’s carbon sink increased by 2.29 billion tonnes CO2 equivalent.

Social Sector:

• Government Spending: Social services expenditure grew at a 15% CAGR from FY21 to FY25.
• Income Inequality: Decline in income inequality, with improvements in rural and urban Gini coefficients.
• Healthcare: Government health expenditure increased from 29% to 48%, significantly reducing out-of-pocket expenses.
• Ayushman Bharat: Saved over ₹1.25 lakh crore.

Employment and Skill Development:

• Unemployment: The unemployment rate declined to 3.2% in FY24.
• Women Entrepreneurship: Strong support for women entrepreneurship, with initiatives focused on credit and skill development.
• Job Growth: The digital economy and renewable energy sectors are expected to generate substantial employment.
• EPFO Payroll: EPFO payroll additions doubled over the past six years.

Labour in the AI Era:

• AI: AI is expected to surpass human performance in key sectors, but faces challenges like reliability and infrastructure.
• India’s Advantage: India’s young, tech-savvy population is well-positioned to harness AI for enhanced productivity.

Issues and Concerns:

• Global Challenges: Challenges such as trade tensions and rising commodity prices could impact growth.
• Slower Investment Growth: Investment growth has slowed due to weak government and private sector CAPEX, partly influenced by elections and global uncertainties.
• MSME Sector: Challenges for MSMEs due to regulatory burdens hindering formalization, productivity, and innovation.
• Employment Quality: Many new jobs are low-skill, which limits economic progress.

Way Forward:

• Economic Reforms: The survey stresses the need for continued economic reforms, particularly around deregulation, skill development, and fostering strategic investments.
• Leveraging Youth: India’s young workforce is a key asset, and leveraging this demographic can help unlock significant growth potential and help the country meet its long-term goal of becoming a 'Viksit Bharat' by 2047.

The Economic Survey 2024-25 highlights India's steady growth trajectory, while also addressing the challenges that need to be navigated to ensure sustained and inclusive development in the future.