Union Finance Minister Nirmala Sitharaman presented the Economic Survey 2023-24 in parliament, forecasting India's real GDP growth for the fiscal year 2024-25 between 6.5 per cent and 7 per cent.
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Driven by "stable consumption demand and improving investment demand", the survey pointed out the country’s economy demonstrated resilience in FY24, growing by 8.2 per cent, exceeding the 8 per cent mark in three out of four quarters. “India’s economy carried forward the momentum it built in FY23 into FY24 despite a gamut of external challenges. The focus on maintaining macroeconomic stability ensured that external challenges had minimal impact on India’s economy,” the survey said.
The survey, however, cautioned that the escalating geopolitical conflicts in 2024 could disrupt “supply chains, increase commodity prices, revive inflation, and stall monetary policy easing”. These factors could affect capital flows and influence the Reserve Bank of India's (RBI) monetary policy stance. Although the global trade outlook for 2024 is positive, domestic factors will be crucial for sustaining growth.
The survey stated that the economy has rebounded sharply from the pandemic, with FY24's real GDP being 20 per cent higher than pre-COVID levels in FY20. This growth has been attributed to strong domestic drivers despite global economic uncertainties. “India's economy grew at an average annual rate of 6.6 per cent during the decade ending FY20, indicating the long-term growth potential.”
In comparison, the IMF projects the global economy to grow at 3.2 per cent in 2024. The average annual global growth was 3.7 per cent during the decade ending FY20. “Inflationary pressures have moderated in most economies with declining global commodity prices and easing of supply chain pressures. However, core inflation remains sticky and driven by high service inflation. Many central banks have hinted at the peaking of the interest rate hike cycle.”
The survey underlines that the shares of the agriculture, industry and services sectors in overall gross value added at current prices were 17.7 per cent, 27.6 per cent and 54.7 per cent, respectively, in FY24.
As the services sector was the major contributor, the high-frequency indicators like GST collections and e-way bills showed double-digit growth, reflecting strong wholesale and retail trade. The GVA in the agriculture sector continued to grow, albeit at a slower pace, as the erratic weather patterns during the year and an uneven spatial distribution of the monsoon in 2023 impacted overall output, the survey pointed.
Within the industrial sector, manufacturing GVA shrugged off a disappointing FY23 and grew by 9.9 per cent in FY24, as manufacturing activities benefitted from reduced input prices while catering to stable domestic demand. Similarly, construction activities displayed increased momentum and registered a growth of 9.9 per cent in FY24 due to the infrastructure build out and buoyant commercial and residential real estate demand, the survey said.
Coming to the banking sector, the survey said with the cleaner balance sheets and adequate capital buffers, the banking and financial sector is well-positioned to cater to the growing financing needs of investment demand. “Credit disbursal by scheduled commercial banks (SCBs) to industrial micro, small and medium enterprises (MSMEs) and services continues to grow in double digits despite a higher base. Similarly, personal loans for housing have surged, corresponding to the increase in housing demand.”
As the NDA government’s focus has been on capital expenditure as an engine for growth and job creation, the capital expenditure for FY24 stood at Rs 9.5 lakh crore, an increase of 28.2 per cent on a year-on-year basis, and was 2.8 times the level of FY20. The government’s thrust on capex has been a “critical driver of economic growth amidst an uncertain and challenging global environment.”
Spending in sectors such as road transport and highways, railways, defence services, and telecommunications delivers higher and longer impetuses to growth by addressing logistical bottlenecks and expanding productive capacities. The survey says it is also incumbent upon the private sector to take forward the momentum in capital formation on its own and in partnership with the government.
The survey points out that India’s social welfare approach has undergone a shift from an input-based approach to outcome-based empowerment. Government initiatives like providing free-of-cost gas connections under PM Ujjwala Yojana, building toilets under the Swacch Bharat Mission, opening bank accounts under Jan Dhan Yojana, building pucca houses under PM-AWAS Yojana have improved capabilities and enhanced opportunities for the underprivileged sections. The approach also involves the targeted implementation of reforms for last-mile service delivery to truly realise the maxim of “no person left behind”, the survey added.
The Direct Benefit Transfer (DBT) scheme and Jan Dhan Yojana-Aadhaar-Mobile trinity have been boosters of fiscal efficiency and minimization of leakages, with Rs 36.9 lakh crore having been transferred via DBT since its inception in 2013.
Referring to the employment, the survey says, the all-India annual unemployment rate (persons aged 15 years and above, as per usual status) has been declining since the pandemic and this has been accompanied by a rise in the labour force participation rate and worker-to-population ratio. From the gender perspective, the female labour force participation rate has been rising for six years, i.e., from 23.3 per cent in 2017-18 to 37 per cent in 2022-23, driven mainly by the rising participation of rural women.
