Syllabus: Economics
Source: IE
Context: The Economic Survey 2024-25, tabled by Union Finance Minister Nirmala Sitharaman, provides a comprehensive analysis of India’s economic performance and outlines key challenges and opportunities for sustainable growth.
Summary and Key Takeaways from Economic Survey 2025:
- Global Economic Context:
- Global growth slowed to 3.3% in 2023, with IMF projecting an average of 3.2% over the next five years.
- Rising trade protectionism and China’s dominance in global manufacturing (one-third of global output) pose challenges.
- India’s economy remains steady despite global headwinds, with real GDP growth pegged at 6.4% in FY25 and expected to grow between 6.3% and 6.8% in FY26.
- Domestic Economic Performance:
- GDP and GVA: Real GDP growth estimated at 6.4% in FY25, close to the decadal average. Gross Value Added (GVA) grew by 6.4%, driven by strong performance in construction, electricity, and utilities.
- Private Consumption: Private final consumption expenditure grew by 7.3%, supported by a rebound in rural demand.
- Inflation: Retail headline inflation softened to 4.9% (April-December 2024), but food inflation rose to 8.4% due to supply chain disruptions and weather vagaries.
- Employment: Unemployment rate declined to 3.2% in 2023-24, with improved labor force participation and worker-to-population ratios.
- Sectoral Growth:
- Agriculture: Expected to grow at 3.8% in FY25, supported by record Kharif foodgrain production (1647.05 lakh metric tonnes).
- Industry: Estimated to grow by 6.2%, with strong performance in construction and utilities.
- Services: Robust growth of 7.2%, driven by financial, real estate, and professional services. Services exports surged by 12.8% (April-November 2024).
- Fiscal Health and Capex:
- Capital expenditure grew by 8.2% (July-November 2024), with a focus on infrastructure development.
- Gross tax revenue increased by 10.7% (April-November 2024), but net tax revenue growth was modest due to higher devolution to states.
- States’ revenue expenditure grew by 12%, with subsidies and committed liabilities driving spending.
- External Sector:
- Merchandise exports grew by 1.6% (April-December 2024), while imports rose by 5.2%.
- Services exports and remittances supported a current account deficit (CAD) of 1.2% of GDP in Q2 FY25.
- Forex reserves stood at $634.6 billion (January 2025), covering 10.9 months of imports and 90% of external debt.
- Banking and Financial Stability:
- Gross NPAs declined to a 12-year low of 2.6% of gross loans.
- Capital-to-risk-weighted assets ratio (CRAR) for banks stood at 16.7% (September 2024), well above regulatory norms.
- Infrastructure and Renewable Energy:
- Railway network expanded by 2031 km (April-November 2024), with 17 new Vande Bharat trains introduced.
- Renewable energy capacity increased by 15.8% (December 2024), driven by solar and wind power.
- Port efficiency improved, with average container turnaround time reduced to 30.4 hours (FY25).
- Social Sector and Health:
- Government health expenditure increased from 29% (FY15) to 48% (FY22), reducing out-of-pocket expenses from 62.6% to 39.4%.
- Social services expenditure grew at 15% annually (FY21-FY25), with initiatives like Samagra Shiksha Abhiyan and PM POSHAN.
- MSME and Deregulation:
- The ₹50,000 crore Self-Reliant India Fund launched to support MSMEs.
- Economic Survey advocates systematic deregulation under Ease of Doing Business 2.0 to boost growth and competitiveness.
- AI and Future Workforce:
- Collaborative efforts between government, private sector, and academia needed to address AI-driven labor market transformations.
- Emphasis on education and skill development to prepare the workforce for AI-augmented jobs.
New Concepts Highlighted in the Economic Survey 2024-25:
1. Systematic Deregulation:
o A three-step process for states to review and reduce regulatory burdens:
§ Identify areas for deregulation.
§ Compare regulations with other states and countries.
§ Estimate the cost of regulations on enterprises.
2. Geo-Economic Fragmentation (GEF):
o Acknowledges the impact of global economic fragmentation on trade and investment.
o Calls for strengthening domestic growth levers to mitigate risks.
3. AI-Driven Labor Market Transformation:
o Emphasizes the need for collaborative efforts between government, private sector, and academia to address AI’s societal effects.
o Focuses on education and skill development to prepare the workforce for AI-augmented jobs.
4. Mittelstand Concept for India’s SME Sector:
o Advocates creating a robust SME sector akin to Germany’s Mittelstand.
o Aims to foster innovation, competitiveness, and economic growth through deregulation and policy support.
5. Risk-Based Regulation: Proposes a shift towards risk-based regulatory frameworks to reduce compliance costs and improve business efficiency.
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