Economic Survey 2024: Indian economy grows over 7% for a 3rd consecutive year; 10 key highlights

Union Finance Minister Nirmala Sitharaman tabled the Economic Survey document in Parliament on Monday, July 22. The survey highlighted the resilience of the Indian economy despite global headwinds. "India’s real GDP grew by 8.2 per cent in FY24, posting growth of over 7 per cent for a third consecutive year, driven by stable consumption demand and steadily improving investment demand," said the survey.

Here are 10 key highlights of the Indian economy's annual report:

1. Resilient Indian economy

The Indian economy stood strong amid global challenges. The economy grew over 7 per cent for a third consecutive year, driven by stable consumption demand and steadily improving investment demand.

Gross value added (GVA) at 2011-12 prices grew by 7.2 per cent in FY24, with growth remaining broad-based. Net taxes at constant (2011-12) prices grew by 19.1 per cent in FY24, aided by reasonably strong tax growth, both at the centre and state levels and rationalisation of subsidy expenditure. This led to the difference between GDP and GVA growth in FY24, according to the survey.

India's CAD (current account deficit) for the last financial year 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.

According to the survey, at the end of March 2024, India’s forex reserves were sufficient to cover more than 10 months of its projected imports for FY25 and 98 per cent of its external debt. India’s external debt has been sustainable over the years, with the external debt-to-GDP ratio standing at 18.7 per cent at the end of March 2024.

The focus on maintaining macroeconomic stability ensured that external challenges had minimal impact on India’s economy, said the survey.

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, according to the survey.

The survey expects healthier corporate and bank balance sheets will further strengthen private investment. Prospects for continued strong growth in FY25 beyond look good, subject to geopolitical, financial market and climatic risks.

 

2. Stable banking sector

The survey underscored that India’s banking and financial sectors displayed a stellar performance in FY24.

"Double-digit and broad-based growth in bank credit, gross and net non-performing assets at multi-year lows, and improvement in bank asset quality highlight the government’s commitment to a healthy and stable banking sector," said the survey.

According to the survey, primary capital markets facilitated capital formation of ₹10.9 lakh crore during FY24 (approximately 29 per cent of the gross fixed capital formation of private and public corporates during FY23). The market capitalisation of the Indian stock market has seen a remarkable surge, with the market capitalisation to GDP ratio being the fifth largest in the world.

3. core inflation falls significantly

According to the survey, the 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, 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.

4. Food inflation a concern

The survey highlighted that food inflation has been a global concern over the past two years. Due to extreme weather events, depleted reservoirs, and crop damage, India's agriculture sector faced challenges, giving rise to food inflation.

According to the survey, food inflation stood at 6.6 per cent in FY23 and increased to 7.5 per cent in FY24.

5. Short-term outlook for inflation is positive

The survey expects inflation to come down in the short term due to normal monsoon and the absence of external policy shocks.

"The RBI projects inflation to fall to 4.5 per cent in FY25 and 4.1 per cent in FY26, assuming normal monsoon and no external or policy shocks. Similarly, the IMF forecasts inflation of 4.6 per cent in 2024 and 4.2 per cent in 2025 for India. Further, the World Bank predicts declining global commodity prices in 2024 and 2025, driven by lower energy, food, and fertiliser prices. This may help bring down domestic inflation in India," said the survey.

6. Growth strategy for new India

The survey emphasised the necessity of a new approach for new India.

"Going forward, the government’s focus must turn to bottom-up reform and strengthening the plumbing of governance so that the structural reforms of the last decade yield strong, sustainable, balanced and inclusive growth," it said.

The survey pointed out that job and skill creation should be among the key focus areas in the short to medium term. Other priorities include tapping the full potential of the agriculture sector, addressing MSME bottlenecks, managing India’s green transition, deftly dealing with the Chinese conundrum, deepening the corporate bond market, tackling inequality, and improving the quality of health of our young population.

The survey said the growth strategy for Amrit Kaal is predicated on six key areas:

(i) There must be a deliberate focus on boosting private investment.

(ii) The growth and expansion of India’s Mittelstand (MSMEs) is a strategic priority.

(iii) The potential of agriculture as an engine of future growth must be recognised, and policy impediments must be removed.

(iv) There is a need to secure financing for the green transition in India.

(v) The education-employment gap must be bridged.

(vi) Focused building of state capacity and capability is required for sustaining and accelerating India’s progress.

7. FDI inflows slow

Foreign direct investment (FDI) inflows slowed in the last financial year. The survey observed that weakening growth prospects, economic fracturing trends, trade and geopolitical tensions, industrial policies and supply chain diversification are reshaping FDI patterns, causing some multinational enterprises (MNEs) to adopt a cautious approach to overseas expansion.

Net FDI inflows to India declined from $42 billion during FY23 to $26.5 billion in FY24. However, gross FDI inflows moderated only by 0.6 per cent from $71.4 billion in FY23 to just under $71 billion in FY24.

8. India’s energy needs to grow 2 times by 2047

According to the survey, India’s energy needs are expected to grow 2 to 2.5 times by 2047 to meet a growing economy's developmental priorities and aspirations.

"Considering that resources are limited, the pace of energy transition would need to factor in alternative demands on the resources for improving resilience to climate change and for sustained social and economic development," said the survey.

With an increase in its renewable energy capacity and improvement in energy efficiency, the survey observed India's progress in climate action has been remarkable.

According to the survey, as of 31 May 2024, the share of non-fossil sources in the installed electricity generation capacity has reached 45.4 per cent. The country has reduced the emission intensity of its GDP from 2005 levels by 33 per cent in 2019.

9. Focus on quality in skill development, employment

The survey underscored that Indian labour market indicators have improved in the last six years, with the unemployment rate declining to 3.2 per cent in 2022-23. The net payroll additions under EPFO have more than doubled in the past five years, signalling healthy growth in formal employment.

The survey highlighted that as artificial intelligence takes root in several spheres of economic activity, it's important to guide technological choices towards benefiting everyone. Employers need to find a balance between using technology and employing workers.

According to the survey, the government has implemented measures to boost employment, foster self-employment, and promote worker welfare. The rise in the number of candidates undergoing skill development through the government’s flagship programmes has underlined the thrust to ‘Skill India’.

10. Sectoral performance

The agriculture and food management sector has registered an average annual growth rate of 4.18 per cent at constant prices over the last five years, according to the survey.

The survey underscored that India's growth of 8.2 per cent in FY24 was supported by an industrial growth rate of 9.5 per cent. Within the four industrial sub-sectors, manufacturing and construction nearly reached double-digit growth, while mining and quarrying and electricity and water supply also experienced significant positive growth in FY24, the survey said.

The services sector continues to significantly contribute to India's growth, accounting for about 55 per cent of the total size of the economy in FY24.

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