Comprehensive Summary of Economic Survey 2024-25
Source: Transcription of Economic Survey 2024-25
Overview of the Economic Survey
- Annual Document: Released annually, typically a day before the Union Budget (this year, January 31st).
- Historical Context: Initiated in 1950-51, separated from Budget in 1964.
- Non-Constitutional Requirement: Not constitutionally/legally mandated, provides context for Union Budget.
- Prepared by: Department of Economic Affairs, Ministry of Finance, overseen by Chief Economic Advisor Dr. V. Anantha Nageswaran.
- Structure: Single volume, 13 chapters in this year's survey.
- UPSC Relevance: Chapters directly relate to UPSC syllabus topics (Industry, Services, Agriculture, etc.).
Chapter 1: State of the Economy - Getting Back into the Fast Lane
Global Growth: Projected at 3.3%. Advanced economies expected to show good growth in 2025, while emerging economies are projected to grow at 4.2% in 2024-25 (slightly down from 4.4% in 2023).
India's GDP Growth: Expected at 6.4% in FY25, with real GDP growth for FY26 projected between 6.3%-6.8%, influenced by global economic factors.
Inflation: CPI combined inflation expected to decrease to around 4% in coming years. April-December 2023 average was 4.9%.
Purchasing Managers' Index (PMI): India's PMI for services is consistently above 50, indicating positive expectations. Manufacturing PMI shows some concerns, remaining below 50 for a period.
GDP Components: Consumption expenditure (C) contributes largest share to GDP (around 60-61%), followed by Gross Fixed Capital Formation (I). Government expenditure (G) and Net Exports (NX) are also components.
Current Account Balance (CAB): India's goods trade balance is negative, while service trade balance is positive. Overall CAB is negative due to higher goods imports.
Capital to Risk-Weighted Assets Ratio (CRAR): Improved CRAR indicates stronger, more stable banks with sufficient capital.
Chapter 2: Monetary and Financial Sector Development - The Cart and the Horse
Financialization Concerns: Highlights financial sector performance but cautions against excessive dominance ("financialization") which could negatively impact macroeconomic stability and regulators.
Non-Performing Assets (NPAs): Gross NPAs of banks significantly decreased to around 2% in September 2024 from a peak around 2018 (7.3% in March 2021), indicating TBS problem improvement.
Twin Balance Sheet (TBS) Problem: TBS problem, referring to stressed corporate and bank balance sheets, is largely resolved.
Profitability and Credit Growth: Scheduled Commercial Banks showing increasing profits and credit growth (14-15% annually or monthly).
Capital Markets: Significant growth in capital markets, with 18.5 crore Demat accounts by December 2024 and 259 IPOs in April-December period (up from 196 last year).
Financial Inclusion: RBI's Financial Inclusion Index (FII) improved to 64.2 in March 2024 from 53.9 in March 2021. FII ranges from 0 to 100, higher number indicates more financial inclusion.
Regional Rural Banks (RRBs): RRBs have 22,000 branches across 700 districts, crucial for rural/semi-urban financial inclusion.
Chapter 3: External Sector
Trade Deficit: Trade deficit has widened, which is a concern.
Exports: Strong performance in non-petroleum and non-gems & jewelry exports; service trade surplus is a positive.
EODB: National Logistics Policy (NLP) and related initiatives improve logistics efficiency, aiming to reduce logistics costs below 8%. Logistics hubs, supply chain efficiency, Trade Connect e-platforms, and DGFT trade portals are initiatives.
FDI Inflows: Increasing gross FDI inflows and service sector FDI.
Forex Reserves: India's foreign exchange reserves at comfortable level (~$640 billion), a significant improvement from 1991 crisis, providing ~1 year import cover. Peaked over $700 billion previously. Components: Reserve Tranche Position (RTP), Special Drawing Rights (SDR), Gold, Foreign Currency Assets (FCA).
Chapter 4: Prices and Inflation
Inflation Softening: Inflation gradually softening, expected to reach around 4%. Softening means prices are decreasing.
Core vs. Headline Inflation: Core inflation (excluding volatile food and fuel) is relatively stable. Headline inflation fluctuates due to volatile items like TOP (Tomato, Onion, Potato). Removing TOP shows more stable inflation trend.
Food Inflation Management: Government measures include Open Market Sale Scheme (OMSS), Bharat Brand for subsidized food grains (wheat flour, rice), stock limits for cereals, duty-free imports for pulses (Desi Chana, Toor/Urad, Masoor, Yellow Peas). Buffer stocks for onions and subsidized onion/tomato sales also used. OMSS is a scheme to release stock from buffer to manage demand and supply.
Weather Events Impact: Extreme weather events can significantly impact food prices and overall inflation.
Chapter 5: Medium Term Outlook - De-regulation Drives Growth
De-regulation Emphasis: De-regulation highlighted as key driver for economic growth by improving Ease of Doing Business and promoting economic freedom. "De-regulation" is a repeatedly used term in the survey, emphasizing its importance for economic progress.
Geoeconomic Fragmentation (GEF): Survey notes global shift from globalization towards Geo-Economic Fragmentation due to political alignments/conflicts, forming trade and investment blocs. GEF implies world is moving away from interconnectedness to politically aligned economic cooperation.
Economic Freedom: Economic freedom is considered both a means and an end to growth. Economic Survey suggests increasing economic freedom is very helpful for growth, acting as both a facilitator and outcome.
Ease of Doing Business 2.0: Focus shift to EODB 2.0, emphasizing reduced fees/tariffs, due process of law, necessary but minimal/feasible regulations. Phase 1 of EODB focused on compliance burden reduction, process streamlining, single-window clearances, redundancy removal, digitization. Regulatory cholesterol (excessive, hindering regulations) is to be avoided in EODB 2.0.
Chapter 6: Investment and Infrastructure
Railway Infrastructure: Railway infrastructure expansion includes increased Vande Bharat train production (reaching 68 trains, from 2 in 2014 and 51 in FY24) and coach manufacturing.
Airports Development: Increased operational airports under UDAN-RCS scheme (88 airports, up from 84) and expanded routes (619 routes, up from 545). UDAN-RCS is Regional Connectivity Scheme.
Shipping Turnaround Time (TAT): Turn Around Time (TAT) at major ports reduced to 30.4 hours (from 48 hours), improving efficiency, reducing costs, enhancing export competitiveness. Lower TAT is better, indicating efficiency.
Rural Infrastructure - Jal Jeevan Mission: Significant progress in piped water to rural households (over 15 crore connections, from 3 crore in past 5 years). States like Arunachal Pradesh, Goa, Haryana, Himachal Pradesh, Gujarat, Punjab, Telangana, Mizoram achieved full coverage. Jal Jeevan Mission (JJM) aims for "Har Ghar Nal Se Jal".
Swachh Bharat Mission: Continued progress in Open Defecation Free (ODF) Plus status. Positive impacts on health indicators like MMR (Maternal Mortality Rate) and IMR (Infant Mortality Rate) noted after 10 years of Swachh Bharat Mission. Swachh Bharat Mission started ~10 years ago.
Urban Infrastructure: Progress in urban housing (PMAY-Urban - 1.18 crore houses sanctioned by 2024), metro rail systems (operational in 23 cities), AMRUT mission achieving ~70% coverage in piped water, Smart Cities Mission (93% projects completed). PMAY-Urban is Pradhan Mantri Awas Yojana - Urban; AMRUT is Atal Mission for Rejuvenation and Urban Transformation.
Chapter 7: Industry
BEI: Consistently above 100 (often above 120 for last 3 years), indicating strong business optimism in industrial sector. BEI is different from PMI; BEI > 100=optimistic, BEI < 100=pessimistic.
Core Sectors Performance: Increased production in core sectors like cement and increased steel consumption. Data in survey graphs often for 6-8 month periods.
Intellectual Property Rights (IPR): Growth in patent filings, grants, designs, trademarks, copyrights, indicating increasing innovation. Higher IPR indicates higher innovation potential in country.
Chapter 8: Services
Service Sector Growth: Increasing share of service sector in Gross Value Added (GVA). India's service export share risen to 4.3% globally (from 3% a decade ago), showing positive service export trend. Data for 2023 paper mentioned India's service sector export share.
Challenges & Opportunities: Technology presents challenges (language barriers, information gaps in offshore work) and opportunities (skill development to bridge gaps). Skill development can address offshore work challenges related to language, information.
Chapter 9: Agriculture and Food Management
Institutional Credit to Agriculture: Institutional credit flow to agriculture increased to 75%, reducing reliance on non-institutional lenders. Scheduled Commercial Banks are highest contributors to institutional credit. 2020 UPSC question highlighted institutional vs non-institutional credit importance. Mahesh Kumar Jain Committee related to agricultural credit recommendations.
Credit Flow to Small & Marginal Farmers: Significant increase in credit flow to small & marginal farmers in last 9 years, increasing from ₹3.47 lakh crore. Small & Marginal farmers (less than 2 hectares or 1 hectare) are ~86% of Indian farmers.
Micro Irrigation: Area under micro-irrigation expanding (increase of approximately 8000-1000 hectares).
Agricultural Schemes: Various schemes promote organic farming (Paramparagat Krishi Vikas Yojana), efficient water use (Per Drop More Crop), soil health (Soil Health Card), diversified agriculture (National Bamboo Mission, Mission Organic Value Chain Development).
Chapter 10: Climate and Environment
Panchamrit & Net Zero Target: India committed to Net Zero emissions by 2070 while pursuing development goals (Vikshit Bharat by 2047). Panchamrit includes 5 elements for climate action.
Renewable Energy Progress: India achieved 46.8% installed capacity from non-fossil sources, progressing towards enhanced NDC target of 50% by 2030. NDC is Nationally Determined Contribution.
Carbon Sink Creation: India created carbon sink of 2.9 billion tonnes CO2 equivalent, progressing towards 2030 target of 2.5 to 3 billion tonnes.
Mission LiFE: Mission LiFE (Lifestyle for Environment) promotes individual actions for environmental sustainability, e.g., reducing food waste, carpooling.
Chapter 11: Social Sector
Social Service Expenditure: Government expenditure on social services increasing, estimated at ₹98 lakh crore.
Education Initiatives: Focus on improving school infrastructure (toilets, internet, computers, electricity) and education quality (Nipun Bharat, Foundational Literacy and Numeracy, PM e-Vidya portal). Nipun Bharat focuses on foundational literacy and numeracy.
Healthcare Initiatives: Expansion of Jan Aushadhi Kendras (14,000), improved immunization coverage (93.5%), operational Ayushman Arogya Mandirs, significant telemedicine reach (31 crore patients served). Improvement seen in IMR (Infant Mortality Rate) and MMR (Maternal Mortality Rate).
Chapter 12: Employment and Skill Development
Labor Market Indicators: Improved Labor Force Participation Rate (LFPR), Worker Population Ratio, decreasing unemployment rate (3.2% as per Economic Survey).
Female Labor Force Participation: Female LFPR also showing improvement.
Gig Economy: Gig economy growth noted, projected 2.35 crore gig workforce by 2029-30 (NITI Aayog report estimate).
Chapter 13: Labour in the AI Era
AI Impact on Labour: Artificial Intelligence (AI) presents both opportunities and challenges for labor market. Survey discusses labour in the AI era.
AI Infrastructure Investment: Economic Survey emphasizes need for investment in AI infrastructure, including data centers, computational resources to enhance reliability in sectors like vehicles, healthcare. AI infrastructure is crucial for reliable AI applications.
Managing AI Impact: Highlights importance of managing AI challenges and opportunities effectively. AI's labour industry impact (positive/negative) depends on managing challenges/opportunities. Survey suggests AI could be growth catalyst if managed properly, not a crisis. Key AI technologies mentioned: DeepSeek r1, ChatGPT.
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