Economic Survey 2023-24: India’s GDP expected to grow 6.5-7%
Finance Minister Nirmala Sitharaman on Monday presented the Economic Survey 2023-24, along with the statistical appendix in the Lok Sabha. The Economic Survey is an annual document presented by the government ahead of the Union Budget to review the state of the economy.
The document also provides an overview of the short-to-medium-term prospects of the economy. The Economic Survey is prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance under the supervision of the chief economic adviser.
The first Economic Survey came into existence in 1950-51 when it used to be a part of the budget documents. In the 1960s, it was separated from the Union Budget and tabled a day before the presentation of the Budget.
The Union Budget for 2024-25 will be presented by Sitharaman on Tuesday. India's GDP is likely to grow at 6.5 to 7 per cent in the current fiscal year amid global challenges which may impact exports, said Economic Survey 2023-24 tabled in Parliament on Monday.
The growth projected for 2024-25 is lower than the economic growth rate of 8.2 per cent estimated for the previous financial year. The Reserve Bank has projected the GDP growth for the fiscal year ending March 2025 at 7.2 per cent.
Global agencies like IMF and ADB see India to grow at 7 per cent. "...the Survey conservatively projects a real GDP growth of 6.5–7 per cent, with risks evenly balanced, cognizant of the fact that the market expectations are on the higher side," said the document tabled by Finance Minister Nirmala Sitharaman in Parliament.
It said the domestic growth drivers have supported economic growth in 2023-24 despite uncertain global economic performance. Improved balance sheets will help the private sector cater to strong investment demand.
The Survey also added a note of caution saying "private capital formation after good growth in the last three years may turn slightly more cautious because of fears of cheaper imports from countries that have excess capacity".
While merchandise exports are likely to increase with improving growth prospects in advance economies, services exports are also likely to witness a further uptick. A normal rainfall forecast by the India Meteorological Department and the satisfactory spread of the southwest monsoon thus far are likely to improve the agriculture sector's performance and support the revival of rural demand, it said.
However, the monsoon season still has some way to go, the Survey said.
Increased foreign direct investment inflows from China can help increase India’s global supply chain participation and push exports, says the Economic Survey. The Survey said as India looks to deepen its involvement in global value chains (GVCs), it needs to look at the successes and strategies of East Asian economies. These economies have typically pursued two main strategies - reducing trade costs and facilitating foreign investment.
It added that India faces two choices to benefit from 'China plus one' strategy and that is either to integrate into China's supply chain or promote FDI from China. "Among these choices, focusing on FDI from China seems more promising for boosting India's exports to the US, similar to how East Asian economies did in the past," the Survey, tabled in Parliament by Nirmala Sitharaman on Monday, said.
Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade.
"This is because China is India's top import partner, and the trade deficit with China has been growing. As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them," it added. The survey explained how increased FDI inflows from China can help in increasing India’s global supply chain participation along with a push to exports.
At present, FDI from China in any sector needs government approval. China stands at 22nd position with only 0.37 per cent share (USD 2.5 billion) in total FDI equity inflow reported in India during April 2000 to March 2024.
The Economic Survey 2023-24 also predicted that the new-age technology, while turbocharging productivity, has the potential to disrupt employment in certain sectors.
The Survey described AI as "phenomenal in its rapid pace of innovation and ease of diffusion" but also cautioned that the the future of work will be reshaped by it.
"... The advent of Artificial Intelligence casts a huge pall of uncertainty as to its impact on workers across all skill levels -- low, semi and high," it said.
The biggest disruption for the future of work is the accelerated growth in AI, which is poised to revolutionise the global economy, the Survey noted.
"India would not remain immune to this transformation. AI is being recognised as a general-purpose technology, like electricity and the internet, which is phenomenal in its rapid pace of innovation and ease of diffusion. As AI systems continue to get smarter and adoption increases, the future of work will be reshaped," it said.
The Survey said AI has considerable potential for boosting productivity, but "also has the potential to disrupt employment in certain sectors".
"Routine tasks, including customer service, will likely witness a high degree of automation; creative sectors will see extensive usage of AI tools for image and video creation; personalised AI tutors can reshape education and sectors like healthcare can witness accelerated drug discovery," it said.
Further, Indian markets are resilient to global geo-political and economic shocks. Despite heightened geopolitical risks, rising interest rates and volatile commodity prices, Indian capital markets have been one of the best performing among emerging markets in FY24, the Economic Survey said.
The BSE benchmark Sensex has surged around 25 per cent in FY24. Moreover, the uptrend continued in FY25, with the 30-share index on July 3 touching the 80,000 mark in intra-day trading for the first time.
"The exemplary performance of the Indian stock market compared to the world and emerging markets over the years can be primarily attributed to India’s resilience to global geo-political and economic shocks, its solid and stable domestic macroeconomic outlook, and the strength of the domestic investor base," said the document tabled by Finance Minister Nirmala Sitharaman in Parliament.
Convergence of efforts across the Centre, states, and local bodies is needed to improve the quality of education, especially primary education, the Economic Survey has suggested.
The National Education Policy (NEP) 2020 is expected to yield foundational literacy and numeracy for every child passing the third standard in the near future, said the Survey for 2023-24 tabled in Parliament on Monday.
The Survey noted education is one of the most critical areas for India’s development, and mission-mode and cost-effective implementation of well-designed and well-intentioned programmes is essential to improve the quality of education, especially primary education, without which further years of education add little value.
"To realise the same, unity of purpose and convergence of efforts across the Centre, state, and local governments is called for, as ‘public education’ is a concurrent list subject," the Survey document said.
According to the Survey, the government's spending on social services including education rose by 9.36 per cent to Rs 23.50 lakh crore in FY24 from Rs 21.49 lakh crore in FY23. Of the total, Rs 8.28 lakh crore was spent on education alone during FY24, around 8 per cent higher from Rs 7.68 lakh crore in FY23.