Economic Survey 2024-25

The Economic Survey for 2024-25 was presented by Finance Minister Nirmala Sitharaman, outlining the current state of the Indian economy. The report marks both opportunities and challenges facing the country as it aims for robust growth amidst global uncertainties. Chief Economic Advisor V Anantha Nageswaran noted a shift from globalisation to protectionism, impacting trade and investment. The survey identifies critical areas for improvement, including domestic consumption, investments, and employment.

Economic Growth Projections

• The Economic Survey projects India’s GDP growth between 6.3% and 6.8% for the fiscal year 2025-26.
• This is a slight decline from the expected 6.4% growth for 2024-25.
• The survey attributes this subdued growth to global economic conditions and a slowdown in capital expenditure.

Consumer Demand Trends

• Private consumption expenditure is expected to rise from 60.3% in FY24 to 61.8% in FY25.
• This increase indicates a rebound in consumer demand, driven mainly by rural consumption.
• However, urban demand remains weak, with modest growth in sectors like passenger vehicles and FMCG.

Investment Landscape

• Investment growth has slowed, with gross fixed capital formation declining.
• Political uncertainties and global excess capacities are cited as reasons for this stagnation. The survey emphasises the need for higher investment rates to achieve developed nation status by 2047.

Employment Dynamics

• The labour market shows improvement, with a decrease in unemployment rates and increased participation, particularly among women.
• However, many new jobs are in low-productivity sectors like agriculture, which poses risks for sustainable employment growth.

Sectoral Contributions

• The services sector remains crucial for economic growth, yet faces challenges from automation and the need for upskilling.
• The textile sector, employer, struggles with competitiveness against countries like China and Vietnam due to complex regulations and high costs.

Deregulation and Reforms

• The survey recommends deregulation to enhance business growth and employment.
• Simplifying compliance for MSMEs could stimulate innovation and productivity.
• The government has initiated several reforms aimed at improving the business environment.

Food and Agriculture Growth

• Agriculture has shown resilience, with an average growth rate of 5% from 2016-17 to 2022-23.
• However, challenges like climate change and water scarcity require targeted interventions to sustain this growth.

Healthcare Accessibility

• The survey marks the high costs of medical education as a barrier for less privileged students.

It calls for policy interventions to make medical education more affordable and accessible.

Cybersecurity in Banking

• The banking sector is increasingly vulnerable to cyber threats.
• The survey indicates rise in cyber incidents, stressing the need for enhanced cybersecurity measures.

Urban Infrastructure Development

• Significant progress has been made in urban sanitation and water supply, with increased coverage reported.
• Government initiatives like AMRUT and PMAY-U aim to enhance urban infrastructure and living conditions.

Environmental Considerations

• The Economic Survey advocates for a balanced approach to energy transition, urging India to retain coal resources until viable alternatives are established.
• The focus remains on achieving net zero emissions by 2070 while ensuring energy security.

Questions for UPSC:

1. Critically discuss the impact of global economic shifts on India’s trade dynamics.
2. Examine the relationship between consumer demand and GDP growth in India.
3. What are the challenges faced by the textile sector in India? Analyse the potential solutions.
4. Estimate the role of deregulation in promoting MSME growth and employment in India.

Answer Hints:

1. Critically discuss the impact of global economic shifts on India’s trade dynamics.

1. Shift from globalization to protectionism has slowed global trade, affecting India’s exports.
2. Increased uncertainty in global markets hampers investment and trade relationships.
3. China’s dominance in manufacturing poses challenges for Indian manufacturers to compete.
4. India’s reliance on global supply chains makes it vulnerable to international disruptions.
5. Need for India to diversify trade partners and enhance domestic manufacturing capabilities.

2. Examine the relationship between consumer demand and GDP growth in India.

1. Private consumption is contributor to GDP, expected to rise from 60.3% to 61.8%.
2. Rural demand has shown resilience, while urban demand remains subdued, impacting overall growth.
3. Weak consumer demand can lead to lower GDP growth, as seen in recent forecasts.
4. Increased disposable income and employment can stimulate higher consumption levels.
5. Government policies aimed at boosting consumer confidence are essential for sustained growth.

3. What are the challenges faced by the textile sector in India? Analyse the potential solutions.

1. High production costs due to a fragmented value chain and lack of vertical integration.
2. Complex regulatory environment hinders competitiveness against countries like China and Vietnam.
3. Need for modernization and investment in technology to enhance productivity and quality.
4. Potential solutions include simplifying compliance, improving supply chain logistics, and encouraging innovation.
5. Strengthening trade agreements and focusing on sustainable practices can enhance global competitiveness.

4. Estimate the role of deregulation in promoting MSME growth and employment in India.

1. Deregulation can reduce compliance burdens, enabling MSMEs to operate more efficiently.
2. Streamlined regulations can encourage innovation and attract investment in the MSME sector.
3. Lower operational costs can lead to job creation as businesses expand their workforce.
4. Government initiatives like Udyam Assist aim to formalize MSMEs and enhance their growth prospects.
5. Supporting MSMEs through deregulation can contribute to overall economic development.