Economic Survey 2024: GDP grew by 8.2%, to sustain 7%+ growth momentum, fiscal deficit down to 6.4% of GDP

• The Indian economy is expected to grow at over 7% rate in upcoming years
• Fiscal deficit down to 6.4% of GDP in FY24
• Current Account Deficit (CAD) down to 0.7% of GDP

With the Union Budget 2024 to be presented tomorrow, Finance Minister Nirmala Sitharaman is presenting the Economic Survey in the parliament today. Think of the Economic Survey as a report card of the country's economic performance over the past year, along with inputs and outlook for the coming fiscal year.

Here are some crucial highlights from the Economic Survey 2023-24:

Macro-economic indicators

Per the World Economic Outlook in April, the global economic growth was pegged at 3.2% in 2023. In contrast, India's real GDP grew by 8.2% in FY24, staying above the 8% mark for 3 out of 4 quarters in FY24.

Gross Fixed Capital Formation, or investments in long-term, value-generating fixed assets increased by 9% real terms in 2023-24.

The government trimmed down fiscal deficit trimmed down from 6.4% of GDP in FY23 to 5.6% of GDP in FY24.The current account deficit, which indicates that the country is a net importer rather than being an exporter, came down to 0.7% of GDP in FY24, as opposed to 2% of GDP in FY23.

While retail inflation averaged at 6.7% in FY23, it dropped down to 5.4% in FY24

During FY24, primary markets saw capital formation, or facilitated raising funds worth Rs 10.9 lakh crore, which makes up for around 29% of the gross fixed capital formation.

India's market capitalization to GDP ratio is the fifth largest in the world.

Inflationary Trends

Core inflation eased down to 9-year lows, while core goods inflation came down to a 4-year low.

However, food inflation continued to stay high, inching up to 7.5% in FY24, as opposed to 6.6% in FY23. This was largely because of adverse weather conditions, which caused a spike in onion and tomato prices and impacted kharif crop production.

Going ahead, RBI's short-term outlook remains positive. Assuming a normal monsoon and no extraordinary policy or geopolitical shocks, the inflation is estimated to drop to 4.5% in FY25, and further down to 4.1% in FY26. These are in line with IMF's inflation forecasts, which stand at 4.6% for 2024 and 4.2% for 2025.

Export-Import trends

India's service exports jumped by 4.9% to $341.1 billion in FY24, driven mainly by IT and software services.

Apart from being the top remittance recipient globally, with remittances worth $120 billion in 2023, the country also witnessed investment inflows from foreign investors.

As of March 2024, India's forex reserves were sufficient to cover over 10 months of projected imports in FY25, and about 98% of all its external debt. The country's external debt to GDP ratio has been largely consistent over the years, standing at 18.7% of the GDP as of March 2024.

Key growth areas to look out for in FY25

Essential to adopt bottom-up reform approach, with special short to medium term emphasis on structural changes, job and skill creation, addressing challenges faced by MSMEs, managing India's transition towards a green, clean economy, deepening the country's nascent bond market and laying greater stress on tackling quality of health, especially amongst young Indians.

Deliberate focus needed on boosting private investment, expanding India's MSMEs, tapping into the potential of India's agriculture sector, manage India's green transition, urgently bridge the employment-education gap and build capacity of states to sustain and complement India's growth. In the medium term, the country's economy is expected to grow at a rate of over 7%.