Report Summary

Economic Survey 2023-24

▪ The Finance Minister, Ms. Nirmala Sitharaman tabled tax collections and higher-than-budgeted non-tax
the Economic Survey 2023-24 on July 22, 2024 in revenue. This was combined with restrained revenue
Parliament. Key highlights of the Survey include: expenditure with a larger share of the fiscal deficit
being accounted for by capital outlay. The fiscal
State of the economy
deficit of the central government is expected to further
▪ Gross Domestic Product (GDP): The Economic reduce to 4.5% of GDP or lower by 2025-26.
Survey has estimated a real GDP growth of 6.5%-7%
in 2024-25. In 2023-24, India’s real GDP grew by
▪ Debt: The general government debt-to-GDP ratio
increased slightly in 2023-24 due to increasing interest
8.2%. Growth in 2024-25 is expected to be supported
rates and lower-than-budgeted nominal GDP growth.
by strong domestic investment demand, improved
However, it is expected to decline on the back of
agricultural performance, and an increase in
monetary policy easing, increase in WPI inflation, and
merchandise and services exports. On the other hand,
continued fiscal consolidation. The Survey noted that
the survey recognised that geopolitical risks leading to
the Centre’s debt is characterised by low currency and
supply-chain distortions, higher commodity prices,
interest rate risks. This is due to a low share of
increased protectionism, and reviving inflationary
external debt and external borrowings being from
pressures can adversely impact economic growth. In
official sources.
addition, any slowdown in private capital formation on
fears of cheaper imports and the progress of the Agriculture and allied activities
southwest monsoon will also impact economic growth.
▪ India’s agriculture sector has recorded an annual
▪ Inflation: Retail inflation in 2023-24 was 5.4%, the average growth rate of 4.2% over the last five years.
lowest level since the Covid-19 pandemic. Food The sector grew at a rate of 1.4% in 2023-24, as against
inflation increased from 6.6% in 2022-23 to 7.5% in a growth rate of 4.7% in 2022-23. This was due to a
2023-24. This was driven by higher food inflation decrease in foodgrain production driven by delayed and
caused by Russia-Ukraine war and domestic weather poor monsoons. The Survey noted that while India is a
conditions. Core inflation (which excludes food and major agriculture producer, its crop yields are much
energy prices) moderated in 2023-24 driven by services lower compared to other major producers. Low yields
such as housing rental inflation. According to the are caused by: (i) fragmented land holdings, (ii) low
Reserve Bank of India, retail inflation is estimated at farm investment, (iii) lack of farm mechanisation, and
4.5% in 2024-25. The Survey noted that India’s short- (iv) insufficient access to quality inputs.
term inflation outlook is benign. However, long-term
price stability may need certain measures. These ▪ Allied activities such as livestock and fisheries have
include: (i) expansion in cultivation of pulses, (ii) performed better than traditional crops. Between 2014-
developing modern storage facilities for vegetables, 15 and 2022-23, the share of livestock in agriculture
and (iii) effective monitoring of build-up of prices from gross value added increased from 24.3% to 30.4%
the farm gate to the final consumer. while the share of fisheries increased from 4.4% to
7.3% respectively.
▪ Current account balance: In 2023-24, India’s current
account deficit reduced to USD 23.2 billion (0.7% of ▪ The Survey noted that the growth of allied sectors
GDP) from USD 67 billion (2% of GDP) in 2022-23. suggest that greater emphasis should be placed on them
The improvement in the current account balance was to boost farmers’ income. Small farmers need to move
because of a decrease in merchandise trade deficit, to high-value agriculture such as fruits, vegetables,
increasing net services exports, and increasing poultry, and dairy. Increasing private investment in the
remittances. Increase in services exports was driven by sector remains vital.
software exports, travel, and business services. India’s Industry
trade deficit is expected to decrease further in the
coming years as production linked incentive schemes ▪ The industrial sector grew by 9.5% in 2023-24. The
help in creating a competitive manufacturing base. GVA of the industrial sector (at constant prices) in
However, risks to India’s external sector include: (i) 2023-24 is 25% higher than the pre-covid level in
fall in demand from major trading partners, (ii) rising 2019-20. This was supported by greater credit offtake,
trade costs, (iii) volatility in commodity prices, and (iv) focus on capital formation, and a supportive policy
changes in trade policies by major trading partners. framework. The sectoral composition of India’s
manufacturing has changed, with automobiles,
▪ Fiscal deficit: The fiscal deficit of the central chemicals, and pharmaceuticals gaining importance.
government has reduced from 6.4% of GDP in 2022-23
to 5.6% of GDP in 2023-24. The reduction in fiscal ▪ The Survey highlighted that electronics manufacturing
deficit is due to a strong growth in direct and indirect has witnessed significant growth since 2014. In 2021-
22, it contributed 4% to India’s total GDP. The direct
Shrusti Singh
July 22, 2024
shrusti@prsindia.org
PRS Legislative Research ◼ Institute for Policy Research Studies
3rd Floor, Gandharva Mahavidyalaya ◼ 212, Deen Dayal Upadhyaya Marg ◼ New Delhi – 110002
Tel: (011) 23234801, 43434035 ◼ www.prsindia.org
Economic Survey 2023-24 PRS Legislative Research

workforce in the production of mobile phones more period, (ii) project structuring issues involving risk
than tripled between 2016-17 and 2021-22. estimation, allocation, and mitigation, (iii) delay in land
acquisition, and (iv) lack of an independent regulator
▪ The Survey observed that India continues to be import for infrastructure sectors. Higher level of private sector
dependent in key sectors like coal, capital goods, and financing and resource mobilisation from new sources
chemicals. Sectors like textiles and food products have will be crucial. This would need support from central,
lost their relative positions. Incentivising research and
state, and local governments.
development and improving skill level of the work
force is needed across industries. Meeting the skill Employment
shortage would require collaboration between industry
▪ The Survey noted that Indian labour market indicators
and academia.
have improved in the last six years with unemployment
Services sector declining to 3.2% in 2022-23. However, India needs to
generate an average of around 78.5 lakh jobs annually
▪ The services sector constituted 55% of India’s
till 2030 in the non-farm sector. This would be needed
economy in 2023-24. The demand for services such as to cater to a rising workforce. To generate and sustain
education, healthcare, and finance is driven by a large quality employment, agro-processing and the care
and young population. The Survey noted that artificial economy are seen as two promising sectors.
intelligence is likely to restrain growth opportunities
for business services and pose a challenge to long-term ▪ The biggest disruption for the future of work is the
sustainability and job creation. growth in artificial intelligence. It has the potential to
boost productivity and disrupt employment in certain
▪ India’s e-commerce market has gained momentum over sectors. State governments can support hiring by
past few years due to technological advancements, businesses by easing compliances and reforming land
new-age business models, and government initiatives. laws. As jobs are created in the private sector,
The sector’s growth is constrained by inadequate skills businesses must bear in mind their responsibility for
required for online selling. Additionally, data privacy
employment generation.
issues and increasing online fraud are also seen as
hurdle to the sector’s growth. Climate change and energy transition
▪ Some of the challenges identified for the services ▪ India has performed well on the renewable energy
sector include: (i) lack of workers with relevant digital front, achieving a cumulative 82.6 GW of installed
skills, (ii) difficulties in accessing finance for small and solar power capacity at the end of April 2024. As of
medium enterprises, (iii) tentative global economic May 31, 2024, non-fossil fuel sources consist of 45%
outlook, and (iv) commodity price uncertainties. of the total installed electricity generation capacity in
India. Additionally, the framework for Sovereign
Infrastructure Green Bonds has enabled resource mobilisation for
▪ The central government’s capital expenditure green projects. The government has raised Rs 36,000
witnessed a three-fold increase in 2023-24 as compared crore via sovereign green bonds in 2023.
to 2019-20 with focus on sectors such as roads and ▪ The Survey noted that India faces a dual challenge of
railways. The Survey noted that capital expenditure by
meeting its energy demands while reducing carbon
the Union and states have a central role in funding emissions. Phasing in of non-fossil fuel sources has
large-scale infrastructure projects. However, given the remained a challenge for India, amplifying the need for
fiscal consolidation plans of the Union and state a diversified set of energy sources. This is expected to
governments, it is important for viable projects to be help India pursue its low-emission pathways and help
executed through public-private partnership. minimise risks associated with energy systems.
▪ Private sector participation in creation of infrastructure Availability and affordability of financial resources
is not forthcoming to the extent desired. This could be will drive the green transition.
due to: (i) lumpy capital investment and long payback
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