Economic Survey 2024-25: State of the Economy

1. Introduction

The Economic Survey 2024-25, tabled by Finance Minister Nirmala Sitharaman, provides a comprehensive review of India's economic performance over the past year and lays the foundation for the Union Budget 2025-26. Prepared by the Economic Division of the Ministry of Finance, under the guidance of the Chief Economic Adviser (CEA), the survey evaluates macroeconomic trends, sectoral growth, and policy measures, offering insights into India’s fiscal health, growth trajectory, and challenges ahead.

2. Understanding the Economic Survey and its Significance

The Economic Survey serves as a crucial analytical document that assists policymakers in understanding the economic strengths, vulnerabilities, and emerging trends impacting the Indian economy. It provides:

• A detailed assessment of India’s economic performance across various sectors.
• Insights into fiscal, monetary, and trade policies, along with projections for future growth.
• An evaluation of global economic developments and their implications for India.
• Recommendations for structural reforms and policy initiatives aimed at ensuring sustainable growth.

Evolution of the Economic Survey

• The first Economic Survey was presented in 1950-51 as part of the Union Budget.
• Since 1964, it has been presented separately, typically a day before the budget.
• It acts as a preliminary document, helping to set the context for the upcoming fiscal policies.

3. Key Highlights of the Economic Survey 2024-25

A. Global Economic Outlook

• The global economy in 2024 experienced moderate but uneven growth, with the International Monetary Fund (IMF) projecting 3.2% growth for the year.
• While the services sector remained strong, global manufacturing slowed due to supply chain disruptions, inflationary pressures, and trade policy uncertainties.
• Monetary policies remained divergent, as central banks across the world adopted different strategies to tackle inflation.

B. India’s Economic Performance

Despite global economic headwinds, India’s economy remained resilient and on a steady growth path. The key highlights include:

• India’s GDP Growth Projection:
• GDP is expected to grow between 6.3-6.8% in FY26 (2025-26).
• For FY25 (2024-25), real GDP growth is estimated at 6.4%, driven by agriculture and services, though manufacturing remains sluggish.

C. Sectoral Growth Analysis

1. Agriculture and Allied Activities

• Projected growth: 3.8% in FY25 due to record Kharif production and increased rural demand.
• Positive impact of government initiatives in irrigation, crop diversification, and agricultural exports.
• Challenges: Climate change, erratic monsoons, and price fluctuations pose risks to farmers' incomes and food security.

2. Industry and Manufacturing

• Growth: 6.2% in FY25, indicating moderate recovery from previous challenges.
• Manufacturing slowed due to weak global demand, but domestic investment and Production-Linked Incentive (PLI) schemes provided some support.
• The Make in India initiative continued to push for self-reliance in critical industries like electronics, defense, and pharmaceuticals.

3. Services Sector

• Growth: 7.2% in FY25, making it the fastest-growing sector in the Indian economy.
• Key drivers include IT, finance, digital services, hospitality, and retail.
• The sector benefited from rapid digitalization, fintech expansion, and increasing global demand for Indian IT services.

D. External Sector Performance

·         Exports and Imports:

• Overall exports (merchandise + services) grew by 6% year-on-year (YOY) during the first nine months of FY25.
• Merchandise exports grew by 1.6%, while imports rose by 5.2%, leading to a widening trade deficit.
• Services exports grew by 11.6%, showcasing the strength of India’s IT and business process outsourcing (BPO) industries.

·         Remittances and Current Account Balance:

• India remained the world’s largest recipient of remittances, supporting its foreign exchange reserves.
• The current account deficit (CAD) remained stable at 1.2% of GDP, benefiting from high inward remittances and strong service sector performance.

4. Major Challenges Facing India’s Economy

A. Geopolitical and Trade-Related Challenges

• Russia-Ukraine war and Israel-Hamas conflict have impacted global trade, energy prices, and inflationary trends.
• Suez Canal disruptions have forced ships to reroute via the Cape of Good Hope, increasing freight costs and delivery times for imported goods.
• Protectionist trade policies in major economies have led to supply chain disruptions affecting Indian exports.

B. Inflationary Pressures and Investment Slowdown

• While global inflation is easing, risks of price volatility remain, particularly in food and energy sectors.
• Food inflation remains a major concern, driven by weather shocks, supply chain inefficiencies, and global commodity price fluctuations.
• Slowing global demand for manufactured goods has reduced private sector investment, leading to weaker industrial growth.

C. Fiscal and Financial Risks

• State governments are experiencing fiscal stress, with rising subsidies, lower tax collections, and dependence on central transfers.
• Ensuring fiscal responsibility and reducing unproductive government spending is critical for long-term economic stability.

5. Policy Recommendations and the Way Forward

A. Managing Geopolitical and Trade-Related Risks

• Diversify trade partnerships and supply chains to minimize dependence on conflict-affected regions.
• Enhance domestic energy security by expanding renewable energy capacity and securing long-term import agreements.
• Strengthen India’s participation in regional and global trade agreements to mitigate risks of economic isolation.

B. Addressing Inflation and Agricultural Challenges

• Strengthen food security by expanding buffer stocks and improving storage and transportation infrastructure.
• Encourage climate-resilient agriculture through technological advancements and better irrigation practices.
• Promote sustainable farming techniques to reduce dependency on unpredictable monsoon patterns.

C. Enhancing Fiscal and Financial Stability

• Improve tax collection mechanisms to increase state revenues and reduce fiscal dependence on central transfers.
• Rationalize subsidies and ensure better targeting of welfare schemes to improve fiscal discipline.
• Encourage states to adopt fiscal responsibility frameworks to prevent excessive borrowing and spending.

D. Boosting Private Sector Investment and Economic Growth

• Strengthen the ease of doing business by reducing bureaucratic hurdles and promoting a business-friendly regulatory environment.
• Incentivize domestic manufacturing and innovation through financial support for research and development.
• Expand infrastructure investments in transportation, digital connectivity, and urban development to fuel long-term economic growth.

6. Conclusion

The Economic Survey 2024-25 provides a balanced assessment of India’s economic progress and challenges. While India continues to grow at a robust pace, risks such as geopolitical tensions, inflationary pressures, and fiscal concerns need strategic intervention. By implementing structural reforms, fostering investment, and ensuring policy stability, India can achieve sustainable and inclusive growth, positioning itself as a global economic powerhouse in the coming decade.

Q1. "The Economic Survey 2024-25 highlights India's robust growth despite global uncertainties. However, key challenges such as inflation, geopolitical risks, and fiscal imbalances persist." Critically analyze .
(250 words)

Answer

Introduction

The Economic Survey 2024-25, presented by the Finance Minister, evaluates India's macroeconomic performance, emphasizing resilient growth despite global disruptions. India’s GDP is projected to grow at 6.3-6.8% in FY26, with 6.4% growth expected in FY25, led by the services and agriculture sectors. However, inflation, geopolitical risks, and fiscal constraints remain significant challenges.

India’s Economic Performance in FY25

1. Strong Economic Growth with Sectoral Variations

• GDP growth of 6.4%, supported by agriculture (3.8%) and services (7.2%), while manufacturing growth remains sluggish at 6.2%.
• Services sector led by IT, finance, and digital economy, contributing the largest share to GDP.

2. Resilience in External Trade Despite Challenges

• Exports (goods + services) grew by 6% YOY, with services exports (11.6%) outperforming merchandise exports (1.6%).
• Remittances remained strong, helping contain the current account deficit (CAD) at 1.2% of GDP.

Key Challenges Hindering Economic Growth

1. Geopolitical and Trade Disruptions

• Russia-Ukraine war and Israel-Hamas conflict affecting global energy prices and supply chains.
• Suez Canal disruptions increasing freight costs, impacting trade competitiveness.

2. Inflationary Pressures and Food Security Concerns

• Volatility in food prices due to climate shocks and supply chain inefficiencies.
• Global commodity price fluctuations impacting domestic inflation.

3. Fiscal Imbalances and Financial Constraints

• State governments facing fiscal stress due to rising subsidies and lower tax collections.
• Growing dependence on central transfers affecting fiscal sustainability.

Way Forward: Policy Measures for Sustainable Growth

A. Managing Geopolitical and Trade-Related Risks

• Diversify trade partnerships to reduce reliance on conflict-prone regions.
• Strengthen India’s role in global supply chains through regional trade agreements.

B. Controlling Inflation and Strengthening Agriculture

• Expand food buffer stocks and improve supply chain logistics.
• Promote climate-resilient agriculture to mitigate weather-related price shocks.

C. Fiscal Reforms for Financial Stability

• Improve tax collection efficiency to enhance state revenues.
• Implement targeted subsidy rationalization to reduce fiscal burden.

D. Boosting Investment and Industrial Growth

• Enhance ease of doing business by streamlining regulatory processes.
• Encourage domestic manufacturing through PLI schemes and infrastructure investment.

Conclusion

Despite global headwinds, India's economic growth remains stable, supported by domestic resilience and structural reforms. However, addressing inflation, trade risks, and fiscal challenges is crucial for long-term sustainability and inclusive development. Strategic policy interventions in trade, agriculture, fiscal management, and industrial growth can ensure India’s economic stability and global competitiveness.

1. With reference to the Economic Survey, consider the following statements:

1.   The Economic Survey is prepared by the Economic Division of the Ministry of Finance under the supervision of the Chief Economic Adviser (CEA).

2.   The first Economic Survey was presented in 1950-51 as part of the Union Budget.

3.   The Economic Survey provides legally binding recommendations for fiscal policies in the Union Budget.

Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2, and 3

Answer: A. 1 and 2 only
Explanation: The Economic Survey is not legally binding but serves as an advisory document to guide policy decisions. It was first presented in 1950-51 as part of the Union Budget but became a separate document in 1964.

2. The Economic Survey 2024-25 projects India’s GDP growth for FY25 (2024-25) to be in the range of:

A. 5.0-5.5%
B. 5.8-6.2%
C. 6.3-6.8%
D. 7.0-7.5%

Answer: C. 6.3-6.8%
Explanation: The Economic Survey 2024-25 projects India's GDP growth at 6.3-6.8% for FY26 (2025-26) and 6.4% for FY25 (2024-25), driven by strong performance in the agriculture and services sectors.

3. Which of the following sectors recorded the highest projected growth rate in India for FY25 as per the Economic Survey 2024-25?

A. Agriculture
B. Industry and Manufacturing
C. Services
D. Mining and Energy

Answer: C. Services
Explanation: The services sector is expected to be the fastest-growing sector in FY25, with a growth rate of 7.2%, driven by IT, finance, and digital economy expansion.

4. Consider the following factors mentioned in the Economic Survey 2024-25 as key risks to India's economic growth:

1.   Geopolitical conflicts such as the Russia-Ukraine war and Israel-Hamas conflict.

2.   Trade disruptions due to Suez Canal restrictions.

3.   High fiscal deficit and growing dependence on central transfers by states.

4.   Rapid urbanization leading to a slowdown in rural consumption.

Which of the factors given above are mentioned as challenges in the Economic Survey?
A. 1, 2, and 3 only
B. 2, 3, and 4 only
C. 1 and 4 only
D. 1, 2, 3, and 4

Answer: A. 1, 2, and 3 only
Explanation: The Economic Survey highlights geopolitical risks, trade disruptions, and fiscal stress as major concerns for India’s economic stability. However, rapid urbanization slowing rural consumption is not mentioned as a challenge.

5. According to the Economic Survey 2024-25, which of the following measures can help India achieve sustainable economic growth?

1.   Strengthening climate-resilient agriculture to mitigate food inflation risks.

2.   Expanding trade agreements to reduce dependency on conflict-affected regions.

3.   Enhancing tax collection mechanisms to reduce states' reliance on central transfers.

4.   Increasing fiscal deficits to promote public spending and boost demand.

Select the correct answer using the codes given below:
A. 1, 2, and 3 only
B. 2 and 4 only
C. 1 and 3 only
D. 1, 2, 3, and 4

Answer: A. 1, 2, and 3 only
Explanation: The Economic Survey suggests climate-resilient agriculture, trade diversification, and improved tax collection as key strategies for sustainable growth. However, increasing fiscal deficits can lead to long-term economic instability rather than sustainable growth.