India’s real GDP is projected to grow between 6.5 to 7 percent in 2024-25, reflecting a robust recovery from the pandemic-induced downturn. The Economic Survey 2023-24, presented in Parliament by the Union Minister of Finance and Corporate Affairs, Smt Nirmala Sitharaman, underscores this optimistic outlook and provides a detailed analysis of the underlying factors driving the economy’s growth.
Swift Post-Pandemic Recovery
The Indian economy has rebounded swiftly from the pandemic, with real GDP in FY24 being 20 percent higher than the pre-COVID levels of FY20. This remarkable recovery is attributed to strong domestic growth drivers that have supported economic expansion despite uncertain global economic conditions. The Economic Survey highlights that during the decade ending FY20, India grew at an average annual rate of 6.6 percent, indicating stable long-term growth prospects.
Potential Risks and Global Outlook
While the growth outlook is positive, the Survey cautions that geopolitical conflicts in 2024 could disrupt supply chains, increase commodity prices, and revive inflationary pressures, potentially stalling monetary policy easing and affecting capital flows. Such scenarios could influence the Reserve Bank of India’s (RBI) monetary policy stance. Despite these risks, the global trade outlook for 2024 remains positive, with an anticipated pickup in merchandise trade volumes following a contraction in 2023.
Sectoral Performance and Contributions to GDP
The Survey provides a detailed sectoral analysis, showing that India’s economy demonstrated resilience to various global and external challenges. Real GDP grew by 8.2 percent in FY24, exceeding 8 percent in three out of four quarters, driven by stable consumption demand and improving investment demand. The shares of the agriculture, industry, and services sectors in overall Gross Value Added (GVA) at current prices were 17.7 percent, 27.6 percent, and 54.7 percent, respectively.
Agriculture Sector
Despite erratic weather patterns and uneven monsoon distribution in 2023, the agriculture sector continued to grow, although at a slower pace. This underscores the sector’s resilience and its critical role in the economy.
Industrial Sector
The industrial sector, particularly manufacturing, bounced back with a GVA growth of 9.9 percent in FY24. This was driven by reduced input prices and stable domestic demand. Similarly, construction activities surged, registering a 9.9 percent growth due to infrastructure development and buoyant real estate demand.
Services Sector
High-frequency indicators reflect robust growth in the services sector, with double-digit growth in Goods and Services Tax (GST) collections and e-way bill issuances. Financial and professional services emerged as major growth drivers post-pandemic.
Investment and Capital Formation
Gross Fixed Capital Formation (GFCF) emerged as a crucial growth driver, with private non-financial corporations increasing their GFCF by 19.8 percent in FY23. This momentum continued into FY24, supported by household investments, particularly in residential real estate, which saw its highest sales since 2013. Banking and financial sectors, with cleaner balance sheets and adequate capital buffers, are well-positioned to meet growing financing needs, further bolstering investment demand.
Inflation and Fiscal Management
Domestic inflationary pressures moderated in FY24, with retail inflation declining to 5.4 percent from 6.7 percent in FY23. This was achieved through government measures such as open market sales, targeted retailing, timely imports, and fuel price adjustments, coupled with RBI’s monetary policy actions. Fiscal consolidation efforts remained on track, with the Union Government reducing the fiscal deficit from 6.4 percent of GDP in FY23 to 5.6 percent in FY24.
Tax Revenue and Government Expenditure
Gross tax revenue (GTR) grew by 13.4 percent in FY24, driven by a 15.8 percent increase in direct taxes and a 10.6 percent rise in indirect taxes. GST collections and e-way bill generation indicate improved compliance over time. Capital expenditure increased significantly, driven by government spending on sectors like transport, railways, defence, and telecommunications, which address logistical bottlenecks and expand productive capacities.
State Government Finances
State governments also showed fiscal improvement, with their gross fiscal deficit being lower than budgeted. States focused on capital expenditure, enhancing the quality of spending. The Union Government’s progressive transfers to states with lower Gross State Domestic Product (GSDP) per capita ensure equitable development.
Banking Sector Stability
The RBI’s vigilant regulatory actions have ensured the stability of the banking sector. The Gross Non-Performing Assets (GNPA) ratio of scheduled commercial banks (SCBs) declined to 2.8 percent, a 12-year low, as of March 2024. SCBs’ profitability remained steady, and macro stress tests indicated their resilience to severe stress scenarios.
External Sector Performance
India’s external sector showed resilience, with service exports reaching a record USD 341.1 billion in FY24. Despite moderation in merchandise exports due to weaker global demand and geopolitical tensions, net private transfers (mainly remittances) grew to USD 106.6 billion. The Current Account Deficit (CAD) improved to 0.7 percent of GDP. Foreign exchange reserves remained comfortable, covering 11 months of projected imports, and the Indian Rupee was one of the least volatile currencies among emerging markets.
Social Welfare and Employment
India’s social welfare approach has shifted to outcome-based empowerment, with initiatives like PM Ujjwala Yojana, Swacch Bharat Mission, Jan Dhan Yojana, and PM-AWAS Yojana enhancing opportunities for the underprivileged. The Direct Benefit Transfer (DBT) scheme and Jan Dhan-Aadhaar-Mobile trinity have improved fiscal efficiency. The annual unemployment rate has been declining, with a rising labour force participation rate and worker-to-population ratio. Female labour force participation has been increasing, driven by rural women.
The Economic Survey 2023-24 presents a comprehensive analysis of India’s economic performance and prospects. The projected GDP growth of 6.5–7 percent for 2024-25 reflects a resilient and robust economy. While potential risks from geopolitical conflicts and global economic uncertainties exist, strong domestic growth drivers, sectoral contributions, investment momentum, and prudent fiscal management underpin India’s economic stability and growth trajectory. The Survey underscores the need for continued focus on capital formation, sectoral development, and social welfare to sustain and enhance economic growth.
