Economic Survey 2024 highlights India's economic strengths, reform outcomes, PM Modi says

The march of AI casts a “huge pall of uncertainty” over impact on workers across skill levels, the Economic Survey said on Monday as it cautioned that alongside other factors this will create barriers to sustained high growth rates for India in coming years and decades.

In the preface, Chief Economic Advisor, V Anantha Nageswaran said “in any case, deploying capital-intensive and energy-intensive AI is probably one of the last things a growing, lower-middle-income economy needs”.

The corporate sector has a responsibility, as much to itself as to society, to think harder about ways Artificial Intelligence (AI) will augment labour rather than displace workers, he wrote.

Putting a spotlight on the hotly-debated issue of AI and job market, the Economic Survey 2023-24 made multiple, and repeated references to AI. (PTI)

It acknowledges that the social impact of emerging technologies such as AI via labour market disruptions and labour displacement “is barely understood”.

The Survey mentioned that hiring in the IT sector has slowed significantly in the last two years.

India needs to recognise and address challenges posed by its dependence on China for critical minerals and examine the implications of phasing down coal on bank balance sheets as it accelerates its green transition, the government’s Economic Survey 2023-24 tabled in Parliament on Monday said.

As part of its national plan to contribute to meeting the global goal of limiting the average temperature rise to 1.5 degrees Celsius, India has committed to reducing emissions by 45 per cent below 2005 levels by 2030, achieving 50 per cent cumulative electric installed capacity from non-fossil fuel-based energy resources, and creating a carbon sink of 2.5 to 3 gigatons of CO2 equivalent through additional forest and tree cover.

The consolidated report on the state of the economy in the previous year highlighted the need to “recognize and deal with challenges posed by dependence on China for critical minerals, which are crucial raw materials needed for e-mobility and renewable energy generation.” It also emphasised the need to examine the implications of phasing down coal for balance sheets and estimate the impact of phasing out coal-fired thermal plants on the freight revenues of the Indian Railways.

Over the years, India has faced increased pressure from some developed countries to rapidly “phase down” unabated coal power at international forums, especially the annual UN climate conferences.

India’s rapidly aging population underscores the urgent need for a comprehensive policy framework to address the growing care demands of its elderly citizens, according to the Economic Survey tabled in the Parliament on Monday.

Coupled with insights from a NITI Aayog position paper, the survey pointed out that the elderly care industry in India — currently valued at USD 7 billion (Rs 57,881 crore) — faces critical gaps in infrastructure, research and know-how for managing geriatric illnesses, monitoring mechanisms and emergency response systems.

The survey highlighted the importance of utilising the ‘silver dividend’ — the untapped work capacity of individuals aged between 60 to 69 years.

The Asian Development Bank (ADB) report, mentioned in the survey, suggests that integrating older people into the workforce through age-friendly jobs and lifelong learning could increase the gross domestic product (GDP) by an average of 1.5 per cent for Asian economies. (PTI)

The Economic Survey presented on Monday highlighted the crucial role of tax policies in addressing income inequality, especially as technology advancements, such as artificial intelligence, could adversely affect employment and income distribution. The survey notes that widening inequality is becoming a significant economic challenge for policymakers globally.

It cited the 2022 State of Inequality in India report, which reveals that the top 1% of earners in India receive 6-7% of the total income, while the top 10% account for one-third of the nation’s total income.

The pre-budget Economic Survey on Monday called for urgent reforms in India’s agricultural sector, warning that the structural issues could impede the country’s overall economic growth trajectory.

Chief Economic Advisor V Anantha Nageswaran called for a pan-India dialogue on the agriculture sector.

The survey, presented ahead of the annual budget, emphasised that India has yet to fully leverage its agricultural sector for economic growth and job creation, unlike East Asian economies and Western developed nations.

“Indian agriculture is not in a crisis now but requires a serious structural transformation because climate change and water criticality loom large in the times to come,” the survey stated.

The CEA advocated for a reassessment of existing policies, despite current government subsidies and support measures for farmers.(PTI)

Capital expenditure on the Railways has increased by 77 per cent over the past five years with significant investments in the construction of new lines, gauge conversion and doubling, the Economic Survey 2023-24 said on Monday.

According to the survey tabled in Parliament by Finance Minister Nirmala Sitharaman, in the financial year 2019-2020, the capital expenditure was 1.48 lakh crore which was increased to ₹2.62 lakh crore in 2023-24.

“Indian Railways, with over 68,584 route km (as of March 31, 2024) and 12.54 lakh employees (as of April 1, 2024), is the fourth largest network in the world under single management,” the survey said.

Highlighting the initiatives taken by the Railway Ministry for the enhancement of operations and services, the survey mentioned Amrit Bharat Station Scheme, Mumbai-Ahmedabad High Speed Rail (MAHSR) project and Dedicated Freight Corridors (DFCs) with the progress made in these respective projects. (PTI)

Issues related to data privacy and rising online frauds are emerging as significant hurdles in the growth of e-commerce in India, said the Economic Survey 2023-24 tabled in Parliament on Monday.

Citing third-party data, the survey said that the e-commerce industry in India is expected to cross USD 350 billion by 2030 and called for the need to educate users on the safe use of e-commerce platforms.

“The rise of e-commerce is constrained by inadequate skills required for online selling, such as cataloguing. Data privacy issues and increasing online fraud have turned out to be the most significant hurdle in the growth of e-commerce in India. It becomes imperative to educate users on the safe use of e-commerce platforms,” the survey said.

The survey mentioned that India’s e-commerce market has gained significant momentum during the past few years, owing to technological advancements, evolving new-age business models coupled with government initiatives like the Digital India program, UPI, One District – One Product (ODOP), Open Network for Digital Commerce (ONDC), new foreign trade policy, easing of FDI limits and Consumer Protection (E-Commerce) (Amendment) Rules 2021. (PTI)

The Economic Survey has projected a prudent growth rate of 6.5-7 per cent for the current financial year, and much will depend upon the progress of the monsoon, Chief Economic Advisor V Anantha Nageswaran said on Monday.

Addressing reporters here after the tabling of the Economic Survey 2023-24 in Parliament by Finance Minister Nirmala Sitharaman, Nageswaran said the economic growth rate of 7 per cent is doable but will depend on how the monsoon rains progress.

“We want to be prudent in projecting growth rate, that is why we have projected the country’s economic growth at 6.5 to 7 per cent in FY24,” he said.

Several countries attempting net-zero at the same time will be a major issue in terms of resource availability, says CEA Nageswaran.

We have to chart our path to Viksit Bharath amidst challenges which is why domestic growth becomes very important, the CEA added at the press briefing.

Necessary for India’s IT and non-IT sectors to find the right balance between the deployment of technology and labour, says CEA Nageswaran.

He also added that India’s corporate sector needs to ensure that the deployment of technology does not hurt the labour and capital share of income.

The Economic Survey for the year 2023-24 was tabled in Parliament on Monday setting the tone for the presentation of the Union Budget on July 23 by Finance Minister Nirmala Sitharaman. Having established India as the fastest-growing economy in the world, the survey comes at a crucial time when global economies are struggling with inflation and recession woes.

Soaring market cap to GDP ratio is not necessarily something to celebrate, says CEA Nageswaran.

Monetary policy transmission is evident in easing core inflation. He added that proactive fiscal and monetary policy measures helped limit deviation from inflation target.

A weak currency does not hurt given India has a very low external debt ratio, says CEA Nageswaran.

In India Exchange rate volatility is lowest among emerging market economies, he added.

No economic approach will be excluded, we need manufacturing, exports, all combined, said Chief Economic Advisor V. Anantha Nageswaran.

The way the global factors are unfolding we do not have the luxury to choose one approach, he added.

The current workforce in 2022-2356 has been estimated using the WPR (usual status, all ages) for 2022-23 from PLFS and the corresponding population estimates by MoHFW. The rise in workforce has been estimated assuming constant WPR for men (54.4 per cent in 2023) and rising WPR for women (from 27.0 per cent in 2023 to 40.0 per cent in 2036, increasing by 1 percentage point every year).

Further, to account for the structural transformation, it is assumed that the share of agriculture in the workforce gradually declines from 45.8 per cent in 202359 to one-fourth in 2047,60 and the corresponding workforce thereby leaving agriculture is added to the rise in workforce.

This is a reasonable assumption to make given the sticky predominance of agriculture in employment, and the potential of high-value agriculture and allied activities to generate remunerative employment, especially for women.

Consequently, Indian economy needs to generate an average of nearly 78.5 lakh jobs annually until 2030 in the non-farm sector to cater to the rising workforce.

The Economic Survey has raised concerns over growing obesity and increase of consumption of highly processed foods laden with sugars and fat. The survey said 56.4 per cent of the total disease burden in India is due to unhealthy diets.

“The Indian Council for Medical Research, in its latest Dietary Guidelines for Indians published in April 202415, estimates that 56.4 per cent of the total disease burden in India is due to unhealthy diets,” it said.

Obesity presents a “concerning situation” and preventive measures must be taken to enable citizens to have a healthier lifestyle, it said.

In the chapter on climate change, the Economic Survey says that at 0.002 sq km, the availability of land is a major challenge for India compared to 0.299 sq km for Australia. This makes India’s fight against climate change more challenging than other leading economies as they strive to meet the UN’s green energy goals.

The Economic Survey says, “Expanding renewable energy and clean fuels will increase demand for land and water. The future scenarios of an increase in energy demand to meet the higher standard of living need to be analysed in the context of rapidly depleting land and water resources.”

“Most renewables are land-intensive and demand the highest land use requirements among the different energy sources. The scaling required for renewable technologies faces several major challenges, including the large requirement for land.”

For instance, according to a study, about 1 MW of solar photovoltaic (PV) may require around 1–1.5 hectares (ha) of land, so 60 GW of solar power would need about 600–900 sq. km of land area at an all-India level. The availability of land is a major challenge for India, which has the lowest land availability per capita amongst the G20 countries, it said.

The transition cost would be amplified with the expected increase in the need for land for renewable energy projects, it said.

The short-term inflation outlook for India is benign, and the expectation of a normal monsoon and moderating global prices of key imported items give credence to the projections made by the RBI and IMF, the Economic Survey said on Monday. The Economic Survey tabled in Parliament today says that “prudent administrative measures” helped India keep inflation in check compared to the rest of the world in the post-Covid recovery phase.

However, to ensure long-term policy stability, the Survey 2023-24 suggested making focused efforts to increase the production of major oilseeds, expanding the area under pulses, and assess the progress in developing modern storage facilities for specific crops.

“Since 2020, countries have been facing challenges in controlling inflation. In FY23, Consumer Price Index (CPI) based retail inflation in India was primarily influenced by higher food inflation, while core inflation remained moderate. Externally, the Russia-Ukraine war led to price pressures, while domestically, excessive heat in the summer and uneven rainfall put pressure on food prices,” it said.

“However, since May 2022, monetary policy broadly focused on absorbing excess liquidity in the system by increasing the policy repo rate by 250 basis points from 4 per cent in May 2022 to 6.5 per cent in February 2023. Thereafter, the policy rate was kept unchanged by focusing on the gradual withdrawal of accommodation, aiming to align inflation with the target, while simultaneously fostering growth. Consequently, the persistent and sticky core inflation observed in FY23 declined to 3.1 per cent in June 2024,” the Economic Survey said.

The Indian economy has recovered and expanded in an orderly fashion post-pandemic and the real Gross Domestic Product (GDP) in 2023-24 was 20 per cent higher than its level in pre-pandemic 2019-20, according to the Economic Survey 2023-24 tabled on Monday in the Parliament.

This, as per the Survey document, is a feat that only a very few major economies had achieved.

“Prospects for continued strong growth in FY25 beyond look good, subject to geopolitical, financial market and climatic risks,” the Economic Survey noted.

Global economic growth has been 3.2 per cent in 2023 as per the World Economic Outlook published this year in April by the International Monetary Fund (IMF). Diverging growth patterns have emerged among countries.

The Economic Survey report tabled in the Lok Sabha on Monday has explored in detail a strategy of reducing the dependence on China-led global supply chain, and what India stands to gain from the much-touted move of China-plus-one.

The appeal of India lies in its large domestic consumer market, which makes it attractive for companies to set up operations there. In the electronics sector, there is a focus on smartphone manufacturing and assembly. The government’s PLI scheme, including tax breaks and subsidies, plays a significant role in attracting companies. The rise in India’s domestic smartphone demand is also a key factor in companies’ decisions to invest there.

For instance, Apple assembled USD 14 billion worth of iPhones in India during FY24, constituting 14 per cent of its global iPhone production. Foxconn has started production of Apple mobile phones in Karnataka and Tamil Nadu. While India may not be an immediate beneficiary of the trade diversion from China, it has witnessed a substantial increase in its electronic exports over time.

The Narendra Modi government assumed power in 2014 with the promise of doubling farm income so that the rural economy could be revived as Indian villages house the majority of the country’s population. The Economic Survey focuses on the agriculture sector, describing it as “one area ripe for and in need of such a pan-India dialogue.”

The Economic Survey that Union Finance Minister Nirmala Sitharaman presented on Monday in the Lok Sabha banks heavily on employment generation in the private sector. It describes it as the key to achieving the aim of making India a developed country by 2047, when the nation will celebrate 100 years of Independence.

“While the outlook for India’s financial sector appears bright, some areas will require focused attention going forward. The significant increase in retail investors in the stock market calls for careful consideration. This is crucial because the possibility of overconfidence leading to speculation and the expectation of even greater returns, which might not align with the real market conditions, is a serious concern. For a developing economy such as India, the financial sector needs to support the banking sector and fill the gap in capital required for the economy’s growth. Therefore, the financial sector should expand at a pace that is in lockstep with economic growth. In particular, India can ill-afford the economy’s over financialisation at its current development stage.

The increased retail participation in financial markets and familiarity with financial products are beginning to grow in line with India’s emergence as the world’s fifth-largest economy. Therefore, firms operating in banking, insurance, and capital markets must keep the interests of the consumers in mind and improve their service quality through fair selling, disclosure, transparency, reliability, and responsiveness. Their internal appraisal and incentive systems must be in alignment with these considerations. It is in their interest and in the interest of the nation that they optimise their commercial goals over the long run.”

The Economic Survey tabled by the finance minister strongly advocates job creation in the private sector to boost India’s economy for a sustained growth and achieve the objective of making India a developed nation by 2047.

The Economic Survey that Union Finance Minister Nirmala Sitharaman presented on Monday in the Lok Sabha banks heavily on employment generation in the private sector. It describes it as the key to achieving the aim of making India a developed country by 2047, when the nation will celebrate 100 years of Independence.

The Economic Survey 2024 says that “job creation happens mainly in the private sector. Second, many (not all) of the issues that influence economic growth, job creation and productivity and the actions to be taken therein are in the domain of state governments”.

“So, in other words, India needs a tripartite compact, more than ever before, to deliver on the higher and rising aspirations of Indians and complete the journey to Viksit Bharat by 2047. In more than one respect, the action lies with the private sector. In terms of financial performance, the corporate sector has never had it so good.”

Budget 2024 is right around the corner, and middle-class taxpayers are harbouring hopes for a push towards affordable housing. Targeted fiscal incentives and regulatory reforms in the upcoming budget could significantly boost affordable housing, making the dream of homeownership a reality for many more Indians.

India produces over 20% of the world’s data but only has 2 per cent of the global data centres. This disparity underscores the urgent need for India to invest in more data centres to manage and secure its growing data output. Moreover, India needs to invest in its cybersecurity.

Year after year, the country has seen finance ministers carry a briefcase with them for the budget presentation. However, in 2019, Finance Minister Nirmala Sitharaman scripted history when she brought a bahi khata with her, and two years later, switched it up with a ‘Made in India’ tablet

Come July 23, Finance Minister Nirmala Sitharaman will present her record-breaking seventh consecutive budget in a row. While many will keenly watch this presentation, one aspect that many may keep an eye on is the pouch she carries with her to Parliament for the budget presentation.

The Indian economy is estimated to have grown 8.2% in real terms in FY24, said the report that Sitharaman tabled today.

“The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers – fiscal and monetary – ensuring economic and financial stability.”

“For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate.

“High economic growth in FY24 came on the heels of growth rates of 9.7% and 7.0%, respectively, in the previous two financial years. The headline inflation rate is largely under control, although the inflation rate of some specific food items is elevated.

“The trade deficit was lower in FY24 than in FY23, and the current account deficit for the year is around 0.7% of GDP. In fact, the current account registered a surplus in the last quarter of the financial year.

“Foreign exchange reserves are ample. Public investment has sustained capital formation in the last several years even as the private sector shed its balance sheet blues and began investing in FY22. Now, it has to receive the baton from the public sector and sustain the investment momentum in the economy. The signs are encouraging.”