Economic Survey 2024-25 - Bank Exams PDF Download

Why is it News?

•  Finance Minister Nirmala Sitharaman has presented the Economic Survey for 2024-25 in Parliament. This survey outlines a plan for reforms and growth, setting the groundwork for the Union Budget for 2025.

Economic Survey

• The Economic Survey is an annual report that the government presents before the Union Budget to evaluate India's economic situation. 
• It is prepared by the Economic Division of the Ministry of Finance under the guidance of the Chief Economic Advisor and is presented in both houses of Parliament by the Union Finance Minister. 
• The survey examines economic performance, highlights developments in various sectors, outlines challenges, and provides an economic outlook for the upcoming year. 
• The Economic Survey was first introduced in 1950-51 as part of the budget and became a separate document from the Union Budget in 1964, being tabled a day before the budget.

Key Highlights of the Economic Survey 2024-25 

State of the Economy

• Global Economy: The International Monetary Fund (IMF) predicts a 3.2% growth for the global economy in 2024, slightly improving to 3.3% in 2025. This growth is tempered by a slowdown in manufacturing due to ongoing supply chain issues, while the services sector remains robust.
• Inflation Trends: Inflation has eased globally, but services inflation continues to be a challenge, leading to different monetary policy responses from central banks around the world.
• Geopolitical Uncertainties: Conflicts such as the Russia-Ukraine war and the Israel-Hamas conflict have disrupted trade, impacted energy security, and contributed to inflationary pressures. Additionally, disruptions in the Suez Canal have forced ships to take longer routes, such as around the Cape of Good Hope, increasing freight costs and delivery times.
• India’s Economic Outlook: India’s Gross Domestic Product (GDP) is expected to grow between 6.3% and 6.8% in FY26 (2025-26), with real Gross Value Added (GVA) estimated at 6.4% in FY25 (2024-25).

Sector-Wise Performance

• Agriculture: Projected to grow by 3.8% in FY25, driven by record Kharif production and strong rural demand.
• Industry & Manufacturing: Expected to grow by 6.2% in FY25, though manufacturing is slowing due to weak global demand.
• Services: The fastest-growing sector, projected to grow by 7.2% in FY25, led by Information Technology (IT), finance, and hospitality.

External Sector

• Overall Exports: Grew by 6% (Year on Year) in the first nine months of FY25, with the services sector growing by 11.6% during the same period.
• Merchandise Exports: Grew by 1.6%, while imports rose by 5.2%, leading to a widening trade deficit.
• Remittances: India remained the top global recipient of remittances, which helped contain the Current Account Deficit (CAD) at 1.2% of GDP.

Monetary and Financial Sector Developments

• Gross Non-Performing Assets (GNPA): Decreased to a 12-year low of 2.6% in 2024 for Scheduled Commercial Banks (SCBs), with net NPAs at 0.6%.
• Return on Assets (RoA) and Return on Equity (RoE): RoA rose to 1.4% and RoE improved to 14.1% by September 2024.
• Reserve Bank of India (RBI) Financial Inclusion Index: Increased from 53.9 in 2021 to 64.2 in 2024, aided by Regional Rural Banks (RRBs).
• RBI Monetary Policy: Maintained the repo rate at 6.5% and reduced the Cash Reserve Ratio (CRR) to 4%, injecting Rs 1.16 lakh crore into the financial system.
• Money Multiplier: Increased to 5.7, indicating enhanced liquidity in the economy.
• Capital Markets: Mobilized Rs 11.1 lakh crore in primary markets from April to December 2024, a 5% increase over the previous fiscal year. Initial Public Offerings (IPOs) significantly increased their fundraising to Rs 1.53 lakh crore.
• Development Financial Institutions (DFIs): Institutions like the National Bank for Financing Infrastructure and Development (NaBFID) and the India Infrastructure Finance Company Limited (IIFCL) actively financed infrastructure projects, with NaBFID sanctioning loans worth Rs 1.3 lakh crore.

External Sector Developments

• Export and Import Growth: Total exports, including merchandise and services, increased by 6% to reach USD 602.6 billion. Imports also rose by 6.9% to USD 682.2 billion, reflecting strong domestic demand.
• Global Trade Challenges: Global trade faced hurdles due to rising trade policy uncertainties and disruptions in key shipping routes, such as the Red Sea and the Panama Canal drought. These disruptions led to higher costs and longer delivery times for international shipments.
• Shift in Trade Practices: There was a noticeable shift towards friend-shoring and near-shoring, where countries prioritized trade within their geopolitical alliances to enhance supply chain resilience.
• Foreign Portfolio Investments (FPIs): FPIs experienced fluctuations due to global uncertainties; however, India’s strong economic fundamentals helped maintain overall positive inflows.
• Foreign Exchange Reserves: As of December 2024, foreign exchange reserves stood at USD 640.3 billion, covering 90% of external debt, which was USD 711.8 billion as of September 2024. This coverage ensured macroeconomic stability and resilience against external shocks.

Prices and Inflation

• Global Inflation Trends: Global inflation peaked at 8.7% in 2022 due to supply chain disruptions but decreased to 5.7% in 2024 as a result of monetary tightening measures.
• Domestic Inflation Trends: Domestic retail inflation fell from 5.4% in FY24 to 4.9% in FY25. However, food inflation increased from 7.5% to 8.4%, driven by rising prices of vegetables (notably tomatoes and onions) and pulses, despite efforts to stabilize prices.
• CPI Volatility: The Consumer Price Index (CPI) experienced high volatility due to ongoing supply chain issues and weather-related disruptions.
• Core Inflation: Core inflation reached a 10-year low, with decreases in service and fuel price inflation contributing to this decline.
• RBI Inflation Projections: The Reserve Bank of India (RBI) revised its inflation projection for FY25 from 4.5% to 4.8% and anticipates 4.2% in FY26. The IMF projects 4.4% in FY25 and 4.1% in FY26 under stable conditions.

Medium-Term Economic Outlook

• IMF Growth Projections: The IMF projects India to become a USD 5 trillion economy by FY28 and USD 6.3 trillion by FY30, with a nominal GDP growth rate of 10.2% from FY25 to FY30.
• Viksit Bharat 2047 Goal: To achieve the Viksit Bharat 2047 goal, India needs to maintain an annual growth rate of 8% for the next 20 years.
• Global Challenges: Potential risks include geo-economic fragmentation, trade restrictions, and China's dominance in manufacturing and energy transition, which could impact supply chains and investment flows to India.
• Forecasted Real GDP Growth: The IMF forecasts India’s real GDP growth at 6.5% annually from FY26 to FY30, with the CAD expected to increase to 2.2% of GDP by FY30.
• Rupee Depreciation: The Indian rupee is projected to depreciate mildly by 0.5% per year, reflecting improved economic stability compared to past decades.

Climate and Environment 

• Climate Adaptation Spending: Increased from 3.7% to 5.6% of GDP between FY16 and FY22. 
• Lifestyle for the Environment (LiFE): Initiative aimed at promoting sustainability, with potential global savings of USD 440 billion by 2030 through reduced consumption and lower prices. 
• Renewable Energy: 46.8% of India’s power capacity is from non-fossil sources, with a target of 50% by 2030. 
• Forest Carbon Sink: Increased by 2.29 billion tonnes of CO₂ from 2005 to 2023. 
• Climate Finance: Conference of Parties 29 highlighted the gap in climate funds, with a goal of USD 300 billion annually compared to the estimated need of USD 5.1 to 6.8 trillion by 2030. 
• Sovereign Green Bonds: India issued USD 20,000 crore in FY24 to fund green projects. 

Sustainable Development and Resilience

• Mangrove Initiative (MISHTI): Restoring 22,560 hectares of mangroves across 13 states and Union Territories.
• AMRUT 2.0: Approved 3,078 water body rejuvenation projects for water conservation.
• PM Surya Ghar: Installed 7 lakh rooftop solar systems, with a goal of reaching 1 crore households.

Energy Security and Transition

• Coal: Remains the primary energy source, with 65,290 MW of supercritical coal plants for improved efficiency.
• Nuclear, Hydrogen, and Bioenergy: Programs expanding to ensure a balanced energy transition.

Social Sector

• Growth in Social Sector Spending: Expected to reach Rs 25.7 lakh crore in FY25, growing at a 15% compound annual growth rate (CAGR) from FY21 to FY25.
• Improvement in Gini Coefficient: Indicates reduced inequality, with rural areas declining from 0.266 to 0.237 and urban areas from 0.314 to 0.284 between 2022-23 and 2023-24.

Education and Skill Development

• Increase in Education Spending: Rose at a 12% CAGR to Rs 9.2 lakh crore, contributing to lower dropout rates of 1.9% in primary and 14.1% in secondary education.
• Growth in Higher Education Enrollment: Increased by 26.5% from 2014 to 2022, boosting the Gross Enrolment Ratio (GER) to 28.4%.

Healthcare and Social Security

• Surge in Healthcare Spending: Increased by 18% to Rs 6.1 lakh crore, with significant savings in medical expenses due to the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY).

Welfare

• Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY): Provides free food grains to 80 crore people, covering 84% of households through ration cards.
• Reduction in Inequality: Fiscal policies have helped raise consumption among the bottom 5% in rural and urban areas by 22% and 19%, respectively.

Employment and Skill Development

• Decline in Unemployment Rate: Decreased from 6% in 2017-18 to 3.2% in 2023-24, with an increase in labour force participation rate (LFPR) to 60.1%.
• Growth of Working-Age Population: Projected to reach 923.9 million by 2026, contributing to a demographic dividend with 26% of the population aged 10-24.
• Increase in Female LFPR: Rose from 23.3% in 2017-18 to 41.7% in 2023-24, driven by higher participation of rural women.
• Rise in Self-Employment: Increased to 58.4%, while regular wage jobs remained at 21.7%.

Employment Trends

• Growth of Formal Sector Jobs: Net payroll additions by the Employees' Provident Fund Organisation (EPFO) doubled from 61 lakh in FY19 to 131 lakh in FY24.
• Support for Women Entrepreneurs: 73,151 startups with women directors supported under Startup India.

Skill Development and Job Creation

• Promotion of Entrepreneurship and Vocational Training: Initiatives like Skill India and Mudra Yojana encourage skill development and entrepreneurship.
• Job Creation in Digital Economy and Renewable Energy: Sectors driving job creation essential for Viksit Bharat.
• Upskilling for Global Trends: Enhancing skills for trends like artificial intelligence (AI) and climate change through various government initiatives.

Labour in the AI Era

• Opportunities and Risks of AI: AI offers potential job risks with 75 million global jobs at risk and 300 million roles exposed, highlighting the need for workforce upskilling and regulatory oversight.
• Growth of India’s AI Market: Projected to grow at 25-35% CAGR by 2027, necessitating a balanced transition through human-AI collaboration.

Economic Challenges According to the Economic Survey 2024-25 

• Global Geopolitical Risks: Conflicts such as the Russia-Ukraine war and disruptions in the Red Sea affecting trade, energy prices, and supply chains.
• Global Trade Slowdown: Protectionism and supply chain realignments impacting India’s export competitiveness.
• Financial Market Volatility: Interest rate fluctuations in the US and European Union potentially causing capital outflows and impacting India’s foreign exchange reserves and currency stability.
• Persistent Food Inflation: Ongoing food inflation creating pressures despite stable core inflation.
• Climate Impact: Erratic monsoons, droughts, and extreme weather events affecting food security and farm incomes.
• Investment and Infrastructure Bottlenecks: Public capital expenditure (Capex) growing at 38.8% CAGR from FY20 to FY24, while private investment remains cautious due to global uncertainties and regulatory concerns.
• High Logistics Costs: Logistics costs constituting 13-14% of GDP, hindering industrial competitiveness despite efforts like the National Logistics Policy.
• Lack of Planned Urbanization: Resulting in traffic congestion, inadequate public transport, and rising housing costs in major cities.
• Delays in Smart City and Urban Transport Projects: Regulatory hurdles and financing gaps causing delays in execution.

Employment and Skilling Gaps

• Jobless Growth Concerns: India is facing a serious problem of jobless growth, where economic growth is happening faster than job creation. This issue is mainly due to a focus on high-skill, low-employment sectors, premature deindustrialization, and mismatched skills.
• Low Labor Force Participation Rate (LFPR): The female LFPR in India is 41.7% (FY25), which is still below the global average of over 50%.

External Sector:

• Foreign Direct Investment (FDI): FDI inflows have shown a positive growth of 17.9% year-on-year. 
• Concerns: However, there are concerns regarding higher repatriation and disinvestment, which impact the overall stability of FDI. 
• Export Dependency: India’s export dependency on the IT and services sector is significant, with 70% of services exports relying on IT and business services. This heavy reliance increases vulnerability to global demand shocks, making the economy susceptible to fluctuations in international demand for these services. 

Climate Change and Energy Transition:

• Energy Transition Challenges: India faces several challenges in its energy transition, including issues related to grid stability, high storage costs, and the slow adoption of renewable energy sources. 
• Coal Dependency: The country’s high dependency on coal continues to delay the shift towards cleaner energy alternatives. This reliance on coal hampers progress in reducing carbon emissions and transitioning to more sustainable energy sources. 
• Climate Risks: India is increasingly vulnerable to climate risks, including extreme weather events. These climate-related challenges, coupled with inadequate global climate finance, pose significant hurdles to sustainable growth and development. 
• EoDB Reforms: Despite efforts to improve the Ease of Doing Business (EoDB), challenges remain in areas such as labor laws, land acquisition, and the complexity of tax regulations. These factors continue to hinder the growth and development of Micro, Small, and Medium Enterprises (MSMEs) and startups in the country. 
• R&D Spending: India’s research and development (R&D) spending is relatively low at 0.64% of GDP. This limited investment in R&D adversely affects the country’s innovation capacity and technological competitiveness on a global scale. 
• Impact of AI: The reliability of Artificial Intelligence (AI) technologies is still under scrutiny. Concerns about biases in areas such as hiring, predictive policing, and automation processes raise questions about the ethical implications and effectiveness of AI applications. 
• Energy Demand for AI: There are projections that the energy demand for AI data centers in India could reach levels equivalent to the country’s total electricity consumption, estimated at 1,580 terawatt-hours. This raises concerns about the sustainability and energy efficiency of AI operations. 

AI Disruption in Sectors: The Indian IT, Business Process Outsourcing (BPO), and banking sectors are facing significant disruption due to AI, particularly in low-value service jobs. The automation potential of AI in these sectors poses challenges for job retention and the future of work.

Conclusion

India's economic foundation is solid, but it faces challenges from global uncertainties, inflation, cautious investment, job creation issues, and climate change. To maintain strong growth and competitiveness on the global stage, the country needs policy interventions, fiscal discipline, and structural reforms.