India’s Economy,an assessment 2024-25

Ira Singh
Khabar Khabaron Ki,14 Jan’24

‘The Economic survey of 2024’,all eyes are now on the Budget 2024!which is expected to be a Vote on Account rather than a full Budget ahead of the General Elections in 2024.
Union Finance Minister Nirmala Sitharaman will be presenting the interim budget for FY 2024-25 in Parliament on February 1.Before the budget,the Ministry of Finance presents the economic survey followed by a press conference held by the Chief Economic Advisor along with other senior officials of the finance.

This analysis aims to dissect the crucial aspects of the survey and their potential impact on the country’s economic trajectory.

Here are top highlights of year 2024 survey:

Performance of Indian economy post-COVID 19
India’s gross domestic product (GDP) growth rate has witnessed a notable rebound. In the fiscal year 2021-2022, India’s GDP expanded by 9.5 percent, showcasing a strong recovery and outperforming most other major economies. This rebound can be attributed to a combination of factors, including government stimulus measures, a revival in consumer demand, and increased industrial production. In FY2023, it grew year-over-year (YoY) at 7.2%, the fastest among major economies. In FY2024, the International Monetary Fund (IMF) projects India’s YoY growth at 6.3%, again the fastest among major economies.

The Indian economy has grown at an impressive rate in the post-COVID-19 years., believe economic experts

Major Potential Growth Sectors of Indian economy
Services to Remain India’s Key Growth Engine say economists

Services will remain India’s export growth engine. The sector’s share of total exports has already risen to 42% in fiscal 2023 from about 30% in fiscal 2012,stated official data. We expect this trend to continue, reflecting the government’s latest trade policy (2023) setting a target to boost overall exports to $2 trillion by 2030,believe economists. Rising comfort with remote work worldwide and the growth of global capability centers in India will stoke services exports

The macro challenge for India in the upcoming decade is to turn traditionally uneven growth into a high and stable trend. Given structural differences with East Asian economies, India will need to follow its own unique path.

Despite GDP growth, export continues to lagging behind, measures to improve

In this third world country India, the manufacturing sector seems to be lagging behind and the government has now envisaged “Make in India” program for getting this sector its much-deserved boost,say experts.

India continues to be the fastest growing economy in the world despite supply chain constraints, rising inflationary pressures and a sluggish global growth.A significant contributor to this is the country’s exports performance which is going strong two years in a row despite strong headwinds. The country’s total merchandise exports in FY2022–2023 are estimated to be $447 billion the highest ever achieved—as compared to $422 billion in the previous fiscal. This 6 per cent y-o-y growth is in tandem with other global manufacturing hubs, such as Hong Kong (SAR) China, Vietnam, and Taiwan.

What’s driving the exports surge
An analysis of the export quantity in the last few years shows how India’s merchandise exports have shifted away from traditional commodity baskets, such as textiles and gems and Jewellery, and have focused more on engineering goods, organic and inorganic chemicals, and electronic goods.

Since the launch of the ‘Make in India’ movement in 2014, annual FDI growth has doubled from $45 billion in 2014–2015 to $84 billion in 2021–2022, leading to an improvement of the manufacturing sector. Further, numerous PLI (Production Linked Incentive)schemes across sectors—such as automobile, textile, electronics, pharmaceuticals, and food products—are empowering domestic manufacturers to become globally competitive. India has also been focusing on improving logistics. For instance, the average turnaround time for container vessels at major ports has improved from 43.44 hours in 2014 to 26.58 hours in 2021. Recent reforms such as PM Gati Shakti and the National Logistics Policy have been implemented to further reduce logistics costs and increase the competitiveness of our products. India’s rankings in the World Bank’s Logistics Performance Index improved significantly over the years, rising from 54 in 2014 to 44 in 2018 and further advancing to 38 in 2023. This attests to the country’s commitment towards improving logistics.

India is making headlines in both space science and economy—but to soar to its aspired heights, it must drive domestic demand through its MSMEs amidst global uncertainties

View: A $5 trillion Indian economy is possible!

After the successful launch of Chandraayan-3 on August 23, 2023, India has now set its sights on the sun by launching Aditya-L1, a spacecraft designed to study the solar atmosphere. Only a handful of countries have achieved this historic feat.

And it is not just in science where India is taking big leaps. The Indian economy, according to IMF estimates, will emerge as the world’s third largest economy by 2027, hopping over Japan and Germany, as its GDP crosses US$5 trillion dollars. By 2047, India aspires to be a developed economy.

According to estimates, India will need at least 6.5% growth to reach its first milestone in 2027 and about 8%–9% growth to reach the second in 2047. The buoyancy in the economy instills confidence that the country, at least in the short run, will likely achieve these numbers. The pace in the first few years will be critical for a sustained, fast-growth trajectory in the long run.

Navigating geopolitical uncertainties and the slowdown in the global economy, undoubtedly, will not be easy. India will have to rely on its own domestic demand to firepower its growth, specifically, private consumption and investment spending. What works in India’s favor on the private consumption front is the size of its consumer base, the rising income, and the aspirations of its young population, which is the largest in the world. As for investments, with the size and scale of operations it has to offer to global companies, the availability of skill and talent, and technology and innovation capabilities, India continues to be an attractive investment destination.believe experts

Significant distinction between previous assessment and present assessment,2024

According to analysis,India to remain fastest growing major economy in the world.Recovering from pandemic-induced contraction, Russian- Ukraine conflict and inflation, Indian economy is staging a broad based recovery across sectors, positioning to ascend to pre pandemic growth path in FY23.

Economic survey 2023 had said that the GDP forecast for FY24 will be in the range of 6-6.8%, depending on the trajectory of economic and political developments globally.

India’s GDP growth is expected to remain robust in FY24 at 7% (in real terms, according to economic experts.

” Welfarism”.,does it only help politically or otherwise

Research finds that there is a clear political pay-off to delivering welfare benefits but only a modest premium for doing it “efficiently,” at least to the bystander.

Over the last decade, welfare programmes in India have proliferated with a particular eye on making delivery more efficient. This essentially means that politicians seek to improve last-mile delivery by using technology-enabled solutions that reduce leakages, discretion and favouritism. The Economist estimates that this “high-tech welfare safety net” includes nearly 300 schemes that have benefited 950 million people, most of them poor, and accounts for 3% of GDP in government spending. Political observers believe this “new welfarism,” with its emphasis on rule-based, direct transfers and use of JAM (Jan Dhan bank accounts, Aadhaar biometric identification, and mobile phones), has won votes and political support for ruling parties

But does efficient welfarism bring with it the political dividends that many assume it does? The impact of welfare programmes hinges on two interlinked questions: do voters reward politicians for delivering benefits? And do voters care about process, namely how those benefits are delivered? In other words, do voters reward efficient implementation that reduces corruption and favouritism?

The upshot of this analysis is that a lot of governance reforms aimed at reducing leakages, discretion, and favouritism are politically viable if voters value process (i.e. how a benefit is delivered to people) to a greater extent. Currently, public discourse on corruption is limited to high-profile cases and is focused on making an example out of influential individuals engaging in corruption or nepotism. There is, however, a need to deepen this discourse. Donors and experts focused on policy design and last-mile delivery need to qualitatively assess how citizens view efficiency- enhancing measures and whether they see any value in them. Public information and awareness campaigns need to highlight the deleterious impacts of favouritism and corruption more explicitly and point to the gains from efficient implementation. A case for efficiency needs to be made, not assumed. Until there is pressure from voters, the political incentives to improve governance and undertake governance reforms will remain weak.

India’s economy is known for its resilience and potential for growth, driven by a large domestic market, a young population, and a burgeoning tech industry. The country’s focus on digitalization and technology-driven innovation could play a crucial role in its economic recovery.