Economic Survey Series – II

State of the Economy: Steady as she goes

• Performance – The fiscal balances of the general government (central and State) together have improved progressively.

• Resilient domestic economy - The Indian economy recovered swiftly from the pandemic, with its real GDP in FY24 being 20% higher than the pre-COVID, FY20 levels.
• Improved states government finance – State governments continued to improve their finances in FY24.

• The quality of spending by state governments has improved in recent years, with state governments focusing more on capex.
• The capex of 23 states as a per cent of GDP improved from 2.2 in FY20 to 2.6 in FY24.
• Decreased government debt - Since the pandemic, the Union and the State Governments have focussed on fiscal consolidation, thus declining debt trajectory of the government till FY23.
• States’ debt burden is gradually easing and the general government debt to GDP ratio increased slightly in FY24.
• Moderation in inflation pressure – There is declining core inflation but volatile food inflation.

According to Economic Survey 2023-24, India is projected as a high-growth and low-inflation economy.

• Resilient financial system - Data from the RBI’s Financial Stability Report of 2024 show that, the Gross Non-Performing Assets (GNPA) ratio declining to 2.8% in March 2024, a 12-year low.
• Safer India’s external sector - On the external front, moderation in merchandise exports continued during FY24 on account of weaker global demand and persistent geopolitical tensions.
• India's service exports have remained robust.
• However, a sharper decline in India’s merchandise import growth, owing to declining commodity prices, resulted in a lower trade deficit in FY24.
• Reduction in macro vulnerability - The fiscal deficit of the Government is expected to drop to 4.5% of GDP or lower by FY26.
• The Government continues to stick to the fiscal glide path and kept the sovereign debt sustainable.
• This is reflected in the downward trajectory of the macroeconomic vulnerability index.

Macroeconomic vulnerability index is an index constructed by combining India’s fiscal deficit, Current Account Deficit and inflation.

• Inclusive growth - India’s social welfare approach has undergone a shift from an input-based approach to outcome-based empowerment.
• Saturation of basic necessities has been recognised as imperative to achieve this, thus impelling an array of flagship initiatives.
• The approach also involves the targeted implementation of reforms for last-mile service delivery to truly realise the maxim of “no person left behind”.
• Improvement in employment - According to the annual PLFS, the all-India annual unemployment rate (persons aged 15 years and above, as per usual status) has been declining since the pandemic.
• There is also a rise in the labour force participation rate and worker-to-population ratio.
• From the gender perspective, the female labour force participation rate has been rising for six years.
• Reduced poverty - The focus on addressing individual deprivations helped in reducing the incidence of poverty.
  • Niti Aayog – There is a steep decline in the headcount ratio of multidimensionally poor between 2015-16 and 2022-23.
• Reduced rural-urban inequality – There is rising consumption spending, as evident from the Household Consumption Expenditure Survey (HCES) 2022-23.
• The monthly per capita consumption expenditure (MPCE) in 2022-23 increased in real terms in both rural and urban areas over 2011-12.
• The difference between rural and urban MPCE also declined in percentage terms.
• Forecast – Indian economy looks forward to FY25 optimistically, anticipating broad-based and inclusive growth.

References

India Budget| State of Economy