Economic Survey 2023-24 Synopsis: A Mixed Picture
Analyzing the Good, the Bad, the Ugly, as well as the Vital Issues Left Unaddressed.
Insights from the Economic Survey 2023-24
The Economic Survey, tabled in the Parliament on Monday, 22nd July, just a day before the regular Budget, offers a mixed picture despite the optimistic tone set by V. Anantha Nageswaran, Chief Economic Adviser, Ministry of Finance, Government of India, in his preface to the 524-page document. Normally viewed as a precursor to the Budget, this year's survey follows an interim budget, presented in February, that has already revealed the fiscal landscape for the first four months of the current financial year. Our analysis delves into the good, the bad, and the ugly aspects of the survey, and most importantly, addresses the vital issues left untouched or insufficiently covered.
The Good: Promising Indicators and Resilience
a.) Economic Resilience and Growth Projections
Despite the global economic challenges, the Indian economy has shown remarkable resilience. The survey projects a robust growth rate of 6.5% to 7% for FY 2024-25, driven by strong domestic demand and a rebound in industrial activities. This optimistic projection underscores India's potential to navigate through global economic turbulence effectively.
b.) Inflation Under Control
Inflation remains largely under control, with the Reserve Bank of India (RBI) projecting it to be 4.5% in FY25 and further declining to 4.1% in FY26. This stability in inflation rates is crucial for maintaining purchasing power and ensuring sustainable economic growth.
c.) Healthy Banking Sector
The banking sector continues to exhibit strength, with double-digit growth in bank credit and gross and net Non-Performing Assets (NPAs) at multi-year lows. This indicates a healthy and resilient banking system, capable of supporting economic expansion through increased lending and financial stability.
d.) Record Remittances and Forex Reserves
India has emerged as the top recipient of global remittances, receiving a record $120 billion in 2023. This inflow supports the domestic economy by boosting household incomes and increasing spending power. Additionally, forex reserves at the end of March 2024 were sufficient to cover over 10 months of projected FY25 imports, providing a strong buffer against external shocks.
The Bad: Challenges and Risks
a.) Global Economic Headwinds
The survey highlights several global challenges, including slowing GDP growth, trade protectionism, and geopolitical conflicts. These factors pose significant downside risks to India's growth trajectory, necessitating proactive measures to mitigate their impact.
b.) Labour Market Data Gaps
A critical shortcoming identified in the survey is the lack of timely and comprehensive data on job creation across sectors, especially in the informal sector. This data gap makes it challenging to objectively analyse the labour market situation and formulate effective employment policies.
c.) Workforce Reduction in Unincorporated Sector
The unincorporated enterprises sector has seen a reduction of 16.45 lakh workers between 2015-16 and 2022-23, highlighting the ongoing employment challenges. This trend raises concerns about the adequacy of job creation in the informal sector, which employs a significant portion of the workforce.
d.) Developmental Challenges
The survey acknowledges that India's journey to becoming a developed nation (Viksit Bharat) by 2047 is fraught with more difficulties compared to China’s rise. The current global environment is less conducive to rapid development, necessitating innovative strategies and robust policy frameworks to achieve this ambitious goal.
The Ugly: Disruptions and Environmental Concerns
a.) AI and Employment Disruption
The rapid advancement in Artificial Intelligence (AI) poses a significant threat to employment across various skill levels and sectors. The survey warns of the potential disruptions AI could cause, displacing jobs and requiring a broader skill set among the workforce to remain relevant.
b.) Environmental and Energy Concerns
Developed nations' pressure on developing countries to reduce emissions while their own AI adoption drives up energy needs is termed as "comedy if not real & tragic" by the survey. This highlights the inherent contradictions and challenges in balancing economic growth with environmental sustainability.
Points the Survey is Relatively Silent On
a.) AI Job Market Challenges
The survey falls short of providing concrete measures to address the challenges posed by AI to the job market. With AI's disruptive potential, it is crucial to develop strategies that can mitigate its impact on employment and ensure workforce readiness.
b.) FDI Strategies
There is a notable absence of detailed strategies to capitalize on the 'China Plus One' approach to attract more Foreign Direct Investment (FDI) from China. Enhancing FDI inflows is essential for sustaining economic growth and expanding industrial capabilities.
c.) Policy Actions on Inequality and Youth Health
Specific policy actions to tackle inequality and improve the health of India's young population, identified as key focus areas, are not elaborated upon. Addressing these issues is vital for ensuring inclusive growth and leveraging the demographic dividend.
d.) Fiscal Health of the States and Deficit Concerns
The survey does not provide any meaningful analysis of whether the fiscal deficit as a ratio of GDP is sustainable. It is also completely silent on the fiscal health of various states. Although this falls primarily within the domain of the Central Finance Commission, a dedicated chapter on the states could have focused the nation’s attention on this critical aspect. This is especially important in the current scenario where there is a significant amount of political rhetoric on fiscal federalism.
Summing Up
In summary, while the Economic Survey 2023-24 highlights India's economic resilience and the strength of its banking sector, it acknowledges significant challenges related to global economic conditions, job creation, AI disruption, and the broader development journey. However, it falls short of providing detailed solutions for some of these pressing issues, particularly in the areas of AI's impact on employment, strategies to increase FDI, and addressing inequality and youth health. As India navigates through these complex challenges, a comprehensive and proactive approach will be crucial to achieving sustainable and inclusive growth.
Given the mixed scenario and the challenging landscape, all eyes are inevitably on the regular Union Budget that Finance Minister Nirmala Sitharaman shall present in Parliament on Tuesday. Whether she will be able to address the concerns and demands of all sections, including the aspirational middle class and salaried employees, remains to be seen.