Union Budget 2024: What the Economic Survey says

India’s GDP projected to grow at 6.5-7% in FY25

India’s Gross Domestic Product (GDP) is projected to grow conservatively at 6.5-7% in real terms in FY25, driven by improved private sector balance sheets, a likely pickup in rural demand with normal rainfall, and increased merchandise exports amid better growth prospects in advanced economies, according to the Economic Survey 2023-24 presented in the Lok Sabha on Monday.

The Survey noted that while India’s current GDP level is nearing its pre-pandemic trajectory by Q4 FY24, potential geopolitical conflicts in 2024 could lead to supply disruptions, higher commodity prices, renewed inflationary pressures, and stalled monetary policy easing, affecting capital flows and the Reserve Bank of India’s (RBI) monetary policy stance.

The projected GDP growth rate is lower than the 8.2% growth recorded in FY24 and over 7% growth seen in the previous three financial years. Chief Economic Advisor V Anantha Nageswaran emphasized the need for substantial domestic efforts to sustain recovery.

“The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges,” Nageswaran stated. He highlighted that for sustained recovery, significant domestic efforts are required due to the challenging global environment.

Nageswaran also noted that sustaining overseas investor interest will be challenging amid higher interest rates in developed countries. Emerging economies must compete with active industrial policies in developed countries that offer substantial subsidies to encourage domestic investment. He added that uncertainties related to transfer pricing, taxes, import duties, and non-tax policies need addressing.

“Geopolitical uncertainties, which are on the rise, will likely exert a bigger influence on capital flows, notwithstanding other reasons for preferring to invest in India,” he added.

India’s Research & Development investment lags behind global peers

India’s Research and Development (R&D) sector has made significant strides, but its investment levels continue to lag behind global leaders, according to the Economic Survey 2023-24 presented in Parliament.

The survey highlights impressive growth in India’s R&D sector, with nearly one lakh patents granted in FY24, a substantial increase from under 25,000 patents in FY20. Data from the World Intellectual Property Organization (WIPO) shows that India experienced a 31.6% rise in patent filings in 2022. This growth is reflected in India’s improved ranking on the Global Innovation Index (GII), rising from 81st place in 2015 to 40th in 2023.

Additionally, India climbed to the 9th rank in the Nature Index 2023, surpassing Australia and Switzerland in high-quality research.

Despite these advancements, India’s R&D investment as a percentage of GDP remains low at 0.64%, compared to China (2.41%), the US (3.47%), and Israel (5.71%). The private sector’s contribution to R&D in India is also limited at 36.4% of the country’s gross expenditure on R&D (GERD), whereas China and the US see contributions of 77% and 75%, respectively. Although GERD in India has more than doubled from Rs 60,196.8 crore in FY11 to Rs 127,381 crore in FY21, there is a pressing need for increased investment and private sector engagement, the survey notes.

The Economic Survey also underscored the need to strengthen the link between higher education, industry, and research to better translate GERD into tangible research output.

“Another challenge is low ‘Land to Lab’ time. Institutions in India develop technologies, but their transformation rate from the lab to society remains low,” the survey states.

While India’s share of high-quality research articles has increased by 44% over the past four years, it remains significantly lower than China and the US, each producing over 20,000 articles. On the human resources front, the number of PhD enrollments in India rose to 2.13 lakh in FY22 from 1.17 lakh in FY15, indicating a growing focus on advanced research training.

In summary, while India is making strides in R&D with notable improvements in patent filings and global rankings, addressing investment gaps and enhancing the commercialization of research are crucial for achieving greater impact.

Survey finds decline in non-agricultural employment, 54 lakh drop in manufacturing jobs

Chief Economic Advisor V Anantha Nageswaran, presenting the Economic Survey 2023-24 in the Lok Sabha on Monday, addressed the debate on employment, attributing recent employment fluctuations to economic shocks rather than structural issues.

India faced two major economic shocks in quick succession: the banking system’s bad debts and high corporate indebtedness, followed by the Covid pandemic. So, it is difficult to conclude that the Indian economy’s ability to create employment is structurally impaired. Nonetheless, going forward, the task is cut out, Nageswaran said.

The survey noted a decline in overall employment in unincorporated non-agricultural enterprises (excluding construction) from 11.1 crore in 2015-16 to 10.96 crore, with a 54 lakh reduction in manufacturing workers. However, he said, job growth in trade and services limited the overall workforce reduction to around 16.45 lakh.

The Survey has urged the private sector to step up in its role for employment generation and capital expenditure.

Employment generation is the real bottom line for the private sector, Nageswaran stated, reiterating that job creation mainly occurs in the private sector, and many growth-influencing actions fall under state governments’ purview.

He said that the government’s focus on capital expenditure has driven economic growth amidst global uncertainties. While the government is responsible for infrastructure development and logistical challenges, the private sector must advance capital formation independently and in partnership with the government.

Economic Survey identifies areas for further growth: PM Modi

New Delhi, 22 July: Prime Minister Narendra Modi on Monday stated that the Economic Survey highlights the current strengths of the economy while pinpointing areas for future growth as India strives to build a “Viksit Bharat” (Developed India).
Finance Minister Nirmala Sitharaman presented the Economic Survey 2023-24, along with its statistical appendix, in the Lok Sabha on Monday. This annual document, released by the government before the Union Budget, assesses the state of the economy and offers insights into its short- to medium-term prospects.
In a post on X, Prime Minister Modi said, “The Economic Survey highlights the prevailing strengths of our economy and also showcases the outcomes of the various reforms our Government has brought.”
“It also identifies areas for further growth and progress as we move towards building a Viksit Bharat,” the prime minister said.

Retail inflation held at 5.4% amid pandemic challenges; food prices rise

The Economic Survey 2024 highlights that the central government’s timely measures and the Reserve Bank of India’s (RBI) stability actions helped keep retail inflation at 5.4% despite challenges from the pandemic and geopolitical tensions. Finance Minister Nirmala Sitharaman noted that headline inflation is projected to be 4.5% in FY25 and 4.1% in the following year, indicating that it is “under control.” However, the government acknowledged that inflation for certain food items remains high.

Presented in Parliament this morning ahead of her seventh Budget, the Economic Survey 2024 provides an overview of the economy’s current state. It notes that supply disruptions from the COVID-19 pandemic and global conflicts led to rising consumer prices in FY22 and FY23. Despite this, government interventions helped keep retail inflation at 5.4% in FY24, the lowest level since the pandemic began.

The survey credits the reduction in LPG and fuel prices with contributing to the lower inflation rate. Last August, the government cut LPG prices by Rs 200, and in March, it reduced petrol and diesel prices by Rs 2.

However, food inflation, which stood at 6.6% in FY23, increased to 7.5% in FY24. The survey attributed the rising food prices to adverse weather conditions, depleted reservoirs, and crop damage, which impacted farm output and food prices.

Tomato prices spiked due to region-specific crop disease, early monsoon rains, and logistical disruptions, it said.

The survey also reports that the Indian economy has recovered and expanded steadily after the pandemic, with an expected growth rate of 6.5% to 7% for the current financial year.
Economic Survey finds rising obesity in India “concerning”

The Economic Survey has raised concerns about rising obesity rates and the increased consumption of highly processed foods high in sugars and fats. It reports that unhealthy diets account for 54 percent of the total disease burden in India.

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

“Obesity is emerging as a serious concern among India’s adult population,” said the Survey, which was tabled on Monday by Finance Minister Nirmala Sitharaman in Parliament.

If India needs to “reap the gains of its demographic dividend, it is critical that its population’s health parameters transition towards a balanced and diverse diet”, it said.

Citing a report from the Indian Council for Medical Research, the Economic Survey observed that the rise in consumption of highly processed foods laden with sugars and fat, coupled with reduced physical activity and limited access to diverse foods, exacerbate micronutrient deficiencies and overweight/obesity problems.

Estimates show that the adult obesity rate in India has more than tripled, and the rise in children is the steepest in the world for India, the survey stated, referring to a World Obesity Federation report.

The survey further said as per National Family Health Survey (NFHS), the incidence of obesity is significantly higher in urban India than in rural India. In urban India, it is 29.8 percent in men versus 19.3 percent in rural India.

The percentage of men facing obesity in the 18-69 age bracket has increased to 22.9 percent in NFHS-5 from 18.9 percent in NFHS-4. For women, it has increased from 20.6 percent (NFHS-4) to 24 percent (NFHS-5).

“Combined with an ageing population in some states, obesity presents a concerning situation. Preventive measures must be taken to enable citizens to have a healthier lifestyle,” the survey said.

In some states, such as in the NCT (Delhi), the proportion of women with obesity is 41.3 per cent, as against 38 per cent for men.

In Tamil Nadu, for men, obesity is 37 per cent and it is 40.4 per cent for women.

In Andhra, it is 36.3 per cent for women while for men it is 31.1 per cent. (With PTI inputs)

MTNews Desk