ECONOMIC SURVEY 2025 | Complete Analysis & Highlights of Economic Survey | ఆర్థిక సర్వే 2025 | IACE

Indian Economic Survey 2024-25 - Comprehensive & Detailed Summary

Economic Survey - Background and Introduction

Importance of Economic Survey

• The Economic Survey is an annual document by the Government of India that provides a report card of the nation's economic performance over the past fiscal year.
• It serves as a crucial tool for the government to analyze economic progress, understand current economic challenges, and formulate informed economic policies and suggestions for the future.
• Just as individuals rely on progress reports to understand their performance and areas for improvement, the Economic Survey is essential for guiding the direction of the country's economy.
• Historically, the Economic Survey has been particularly vital during critical junctures such as economic crises, the era of Five-Year Plans, and the COVID-19 pandemic, providing essential data and in-depth analysis to navigate these challenges.

Historical Background

• The first Economic Survey in India was presented in 1950-51, marking the beginning of a systematic economic review after independence.
• Until 1964, the Economic Survey was presented *along with* the Union Budget. This practice was changed in 1964 when the Economic Survey was *separated* from the budget, to allow for its insights and recommendations to inform the budget-making process more effectively. Presenting it *before* the budget allows policymakers to consider the survey's analysis when formulating budget proposals.
• The Department of Economic Affairs, under the Ministry of Finance, is responsible for preparing the Economic Survey. This department is the key economic advisory body within the government.
• The Chief Economic Advisor (CEA) of India *guides* the preparation of the Economic Survey. While the CEA and their team provide intellectual leadership and direction, the actual drafting and compilation are undertaken by the Department of Economic Affairs. The current CEA is Anantha Nageswaran.
• J.J. Anjaria holds the distinction of being the first Chief Economic Advisor of India, under whose guidance the first Economic Survey was created.
• Until 2022, the Economic Survey was presented in *two volumes*. Volume 1 provided a broad overview and analysis of key economic trends and policy challenges, while Volume 2 offered detailed sectoral and statistical data. Since 2022, the Economic Survey has been consolidated into a *single volume* for conciseness and integrated analysis.
• Volume 1 traditionally focused on analytical issues, policy discussions, and overall assessments of the economy. Volume 2 provided detailed data and sectoral reviews, covering various segments of the Indian economy and state-level performance.

Structure of the Economic Survey

• The current Economic Survey is structured into two main parts: Part A and Part B, within the single volume format.
• Part A primarily focuses on Macroeconomics, Fiscal Development, and Sectoral Performance. This part provides a broad overview of the economy's macroeconomic situation, government finances, and the performance of different sectors.
• Part B delves into Socio-Economic Challenges, Financial Projections, and External Sector issues such as Foreign Trade. This section addresses social and economic challenges facing the nation and provides future projections.
• The Economic Survey places significant emphasis on *Macroeconomics* in Part A because it is crucial to understand the overall economic picture and macro-level trends to formulate effective policies and understand the broad direction of the Indian economy.

Aspects of Macroeconomics

• Inflation is a central macroeconomic concern analyzed in the Economic Survey. It examines trends in *overall inflation* (headline inflation) and *food inflation* (Consumer Food Price Index - CFPI), understanding that both high and low inflation levels can be detrimental to economic stability and growth. The survey informs monetary policy decisions aimed at maintaining price stability.
• Price Levels and their stability are considered essential for a healthy economy. The survey analyzes price trends and their impact on various sectors and the overall economy.
• Unemployment trends and rates are a critical focus, as they reflect the health of the labor market and overall economic well-being. The survey assesses employment generation, unemployment rates, and skill development initiatives.
• Understanding these macroeconomic factors is crucial as they *significantly influence* the government's economic policies, budgetary decisions, and overall economic management strategies.

Phony Economy

• A "Phony Economy" refers to an economy that is heavily reliant on *illegal and illicit activities*** for economic sustenance. This includes sectors like drugs, weapons smuggling, human trafficking, and casinos.
• These types of activities, while generating revenue, are detrimental to long-term, sustainable economic development. They undermine legitimate businesses, create social instability, and divert resources from productive sectors.
• The Economic Survey implicitly emphasizes the importance of strengthening the *formal economy* and curbing *illegal economic activities*** to ensure robust and ethical economic growth.

Chapter 2: Monetary and Financial Developments

Banking Sector

• India's banking sector has shown steady growth and a positive outlook, indicating resilience and potential for further expansion.
• Scheduled Commercial Banks (SCBs) have demonstrated improved profitability, reflecting better operational efficiency and asset management.
• Gross Non-Performing Assets (GNPAs) of SCBs have decreased to 2.6% for FY24, reaching a 12-year low, signaling improved asset quality and reduced risk in the banking system.
• Regional Rural Banks (RRBs) have expanded their branch network, reaching 21,856 branches in 2023 (compared to 14,494 in 2006), enhancing financial inclusion in rural areas.
• Capital to Risk Weighted Asset Ratio (CRAR) for banks stands at a strong 16.7%, indicating a healthy capital adequacy and financial stability of the banking sector.
• RBI's Financial Inclusion Index has shown significant improvement, rising from 53.9 in March 2021 to 64.2 in 2024, demonstrating progress in bringing more people into the formal financial system.
• Cyber attacks remain a significant concern for the banking sector, with approximately one-fifth of reported cyber cases related to banks, highlighting the need for enhanced cybersecurity measures in the financial industry.

Capital Market

• The capital market has shown strong mobilization in the primary market, raising ₹11.1 Lakh Crore for FY24, indicating robust investor confidence and fundraising activity.
• Demat accounts have surged by 33% to reach 18.5 crores, reflecting increasing retail participation and digitization of the capital market.
• Initial Public Offerings (IPOs) have increased by 32.1%, indicating a vibrant primary market and companies' willingness to tap into public funding.
• The Bombay Stock Exchange (BSE) capitalization to GDP ratio is notably high at 136%, significantly exceeding that of China (65%) and Brazil (37%), suggesting a relatively deep and active equity market in India.

Insurance Sector

• The total insurance premium grew by 7.7% in FY24, indicating continued expansion of the insurance sector.
• Insurance penetration, however, decreased slightly from 4% in 2023 to 3.7% in 2024, suggesting a need for greater efforts to expand insurance coverage.
• Life insurance penetration also saw a marginal decrease from 3% in 2023 to 2.8% in 2024, indicating similar trends as overall insurance penetration.
• Non-life insurance penetration remained stable at 1% in both 2023 and 2024, suggesting steady but not increased adoption of non-life insurance products.

Pension Sector

• The number of pension subscribers increased to 783.4 lakhs in September 2024 (from 675.2 lakhs in 2023), reflecting growing awareness and participation in pension schemes.
• India's score in the Global Pension Index 2024 decreased to 44 points (from 45.9 in 2023), indicating a need for further reforms and improvements in the pension system to enhance retirement security.

Chapter 3: External Sector

Global Trade

• Global trade faced significant headwinds from various factors including Red Sea issues, Hormuz Strait tensions, political proximity, climate change impacts, and Panama Canal issues, all of which disrupted supply chains and trade flows.
• The World Trade Organization (WTO) projects exports to grow at 3.5% and imports at 3% for FY25 (third quarter of the year), indicating a modest recovery in global trade despite ongoing challenges.

Tariff Rates

• Global tariff rates have generally increased, reflecting a trend towards protectionism and trade barriers in some regions.
• India's average tariff rates, in contrast, have fallen from 4.8% to 1.7% in the last financial year, signaling a move towards trade liberalization and reduced import costs.
• China's tariff rates have also decreased from 16.4% to 8.3%, mirroring a similar trend of tariff reduction in another major economy.
• India imposed 26,000 new non-tariff restrictions between 2020-24, primarily in sectors like agriculture, manufacturing, and natural resources, suggesting a strategic use of non-tariff measures to manage trade and protect domestic industries.

India's Trade Performance

• India's overall exports are expected to grow by 6% and imports by 6.9% in the upcoming nine months, indicating a positive outlook for trade performance in the near term.
• India's share in global exports was 2% in 2022, demonstrating a growing but still relatively modest share in worldwide exports.
• India is recognized as the second largest exporter globally in sectors like telecommunications, computers, and information services, highlighting its strength in technology and service exports.

Balance of Payments (BOP)

• India's Current Account Deficit (CAD) is at 1.2% of GDP, considered manageable and within sustainable limits.
• The Capital Account is in surplus, indicating healthy capital inflows into the Indian economy.
• Foreign Direct Investment (FDI) in India reached a cumulative total of $1 trillion between April 2000 and September 2024, marking a significant milestone in attracting foreign investment.
• FDI is expected to grow further by 17.9% in FY25, indicating continued investor confidence and potential for increased foreign capital inflows.