Economic Survey of India: Under-Reported Takeaways

On 22 July,2024, India tabled the Economic Survey for the year 2024. The economic survey is one of the most important fiscal documents in the nation, as it represents the growth & development that has occurred in various sectors of the nation. Economic Survey also showcases the strengths and weaknesses of the economy, in addition to giving a sectoral analysis as well. It represents the overall macroeconomic indicators that are prevalent in the nation. The first economy survey was tabled in 1950-51. The economic survey is also an indicator of how the upcoming budget would be shaped. 

The economic survey points out various salient features of the Indian economy. The economic survey has pointed to the post-pandemic recovery by the Indian economy to record a staggering growth of 8.2% in real terms in FY–24. The geopolitical challenges like the Russia-Ukraine war, Israel-Hamas war have not adversely affected the economy of the nation. The inflation rate as noted by the economic survey is largely under control. The real GDP growth of India has remained on the higher side when compared to the global indicators. The economic survey has noted that global growth has returned to its pre-pandemic levels with the ratio of gdp between pre pandemic & post-pandemic levels, in all major economies recovering quite spectacularly. 

The Indian ratio is highest at 120, with Thailand being at the lowest at 100. The survey has understood that global growth in this era has contributed to the services & manufacturing sector picking up greater pace since October 23 which has led to a global economic recovery of sorts in recent years. Despite the increased geopolitical tensions, the survey has noted that geopolitical risks have reduced massively in the last few months. Given, inflationary rate is around 6% in the nation, the report has noted that its in line with the global condition of a lessening interest rate, which has primarily occurred due to recalibration of supply chains, globally. The moderation in global commodity prices has seen massive corrections in all major product groups, namely: Energy, Oils, Grains, Fertilisers and Metals-Minerals. 

The report has suggested that fixed investments ratio has increased as part of the nominal GDP, primarily due to the increase in capital expenditure(expenses that create assets), which is a factor pointed out in various pre-budget analyses. The only major contradiction that the economic survey has with the media reports, is the strong uptick of private consumption expenditure expenditure by 4% in real terms. The indicator used is the vehicle sales & air passenger traffic which are questionable indicators if analysed from the perspective of economy. 

One of the unique takeaways is the typical point of increased household savings in the form of physical assets which has increased in the last 10 years of the Modi government with a significant increase in the post covid era. The increase in savings as part of GDP is a welcome sign because that means, there can be greater scope for private investment which will improve the economic condition of the nation at large. The only point of concern in the entire economic survey is the low catering of bank loans towards industry, which is less than the sectors of MSME-Housing & Services to name a few. This is a worrying trend, as industry tends to create more jobs in the short run(simple Keynesian economics) whereas other sectors are usually not very productive in creating employment opportunities for the nation.

The big takeaway is the increased tapping into corporate bonds by large corporations, which can maintain their capital structure in the longer run. The only negative point here is the lower corporate bonds in the latest quarter, which may be primarily due to services sector GVA(gross value added) value lagging than the pre pandemic trend, which is a major issue that the government has to address in its upcoming budget. 

The most interesting takeaway is the comparative figures of indicators like: GDP, GVA, Private Consumption, Industrial GVA, Services GVA, GFCF. The comparison of pre-pandemic & post pandemic levels, shows that, coronavirus in fact led to a strong economic growth which clearly means that the Indian economy in certain sectors is decoupling from the global economy. The fiscal discipline mantra of the Central Government is finally showing good results, with revenue deficit falling from 7.3% of GDP to 2.6% of GDP in the past 4 years.

This one single figure can in fact promote the government to spend more on revenue expenditure in order to reduce food inflation in the nation & also launch new subsidy based schemes for farmers & white collared workers, especially in the aftermath of the elections. The enormous increase in the non-tax revenue of the government also shows that the Indian economy over the space of next 4–5 years can actually decouple from direct tax based economy.

The other major takeaways in the economic survey like the increase in employment or liquidity growth has been covered in various media sections. Overall, the economic survey points to one common result that the government’s approach of maintaining fiscal stability during the pandemic & keeping off the urge to give cash transfer schemes has had a positive impact on the economy, which should be ideally consolidated in the upcoming budget of the government.