Economic Survey 2024-25: Highlights & Brief Analysis

Introduction & Highlights

Economic Survey 2024-25 highlights several key trends in the Indian economy, including a focus on growth momentum, macroeconomic stability, and sector-specific developments.

Brief Analysis of Economic Survey 2024-25

The economy shows signs of recovery and resilience, particularly in the financial sector. However, the report also underscores the persistent challenges from global uncertainty and climate-related risks.

1. Macroeconomic Overview: 

• • Recovery & Growth: The Indian economy is showing a “rebound” and “momentum towards high growth” after facing significant challenges. The survey emphasizes a focus on “non-regulation” to boost growth.
  • Key Economic Indicators (HFIs): The document references high-frequency indicators (HFIs) grouped into sets, reflecting the complexity of economic analysis. These cover consumption (e.g., power, e-way bills, GST), production (e.g., IIP, 8-core industries, tractor sales), financial (e.g., bond yields, forex reserves, stock indices), and other metrics (e.g., fuel consumption, exports, employment).

2. Monetary and Financial Sector Development:

• • Banking Sector Stability: The banking sector exhibits strong stability with “declining asset impairments, robust capital buffers, and strong operational performance.” The gross non-performing assets (NPAs) have fallen to a 12-year low of 2.6% of gross loans, and the capital-to-risk-weighted assets ratio (CRAR) stands at a healthy 16.7%.
  • Increased Liquidity: Measures like a decrease in the cash reserve ratio (CRR) by the RBI have increased liquidity within the banking system, with the money multiplier (MM) also showing an increase (“Higher Money Multiplier as of December 2024, indicating higher liquidity in the market”).
  • Credit Growth: While overall bank credit has seen a “moderation in growth”, credit to MSMEs is growing at a robust 13% YoY as of November 2024, faster than larger enterprises (6.1%). The report notes a “new credit up-cycle” beginning in the economy.
  • GIFT IFSC: The banking ecosystem at the GIFT International Financial Services Centre (IFSC) is growing, with total assets of IBUs crossing USD 70 billion and cumulative transactions exceeding USD 975 billion.

3. Fiscal Health:

• • Sound Fiscal Footing: The Union finances are described as being on a “sound and sure footing.” The report provides a comparative analysis of the growth in fiscal parameters (GTR, NRR, NTC etc) over two time periods, indicating a positive trend.
  • Capex and Fiscal Space: There is a “strong correlation between capex and fiscal space,” indicating the importance of capital expenditure in fiscal management. States with a higher capital expenditure tend to have better fiscal health.

4. External Sector:

• • Global Uncertainty: The report notes a “rise in global uncertainty” which poses a challenge to the Indian economy.
  • FPI Inflows: Net flows from Foreign Portfolio Investors (FPIs) into the debt segment are analyzed, highlighting the trends and the impact of global index inclusion. The increase in demand for India’s G-Secs is expected to lower the borrowing costs for the government.
  • Sovereign Bond Yields: The document compares India’s sovereign bond yields to those of other advanced and emerging market economies. It points to increased global uncertainty driving yields up, contrasting with lower yields in China.

5. Sectoral Analysis:

• • Industry: The industrial sector is growing, driven by sustained increases in steel production and consumption. There is focus on intellectual property (IP) growth, with increases in patents, trademarks, and copyrights being filed and registered. However, private sector R&D spending is seen as “low and concentrated.”
  • Services: The services sector is showing strong growth (“PMI services stay strong in FY25”), evidenced by robust PMI data. The report breaks down the State-wise share in service GVA (Gross Value Added), focusing on areas like trade, finance, real estate, and professional services.
  • Agriculture: The report highlights the importance of irrigation, noting the various sources of irrigation and their trends over the years. There is discussion on the impact of rainfall variability and its effect on agriculture, exemplified by comparisons between Punjab (high irrigation, high yield) and Jharkhand (low irrigation, low yield).

6. Social Sector:

• • Health Expenditure: The analysis tracks the Total Health Expenditure (THE) per capita and as a share of GDP.
  • Rural Livelihoods: The Deendayal Antyodaya Yojana – National Rural Livelihood Mission (DAY-NRLM) has mobilized 10.05 crore rural households into self-help groups and promoted agri-nutri gardens and entrepreneurship.

7. Other Notable Points:

• • Climate and Environment: The survey recognizes the “climate and environment: adaptation imperative.” It points to the growing frequency of extreme weather events that are “driving inflation in subsequent months”.
  • Labor: The report also includes analysis of employment, noting a change in the distribution of male workers by sector between 2017-18 and 2023-24.
  • AI and Labor: The document poses the question of whether AI constitutes a “crisis or a catalyst” in the labor system.

Important Quotes:

“The success in inflation control, the consequent easing of monetary policies, and expectations of lower borrowing costs began to reflect in the downward trajectory of sovereign bond yields of advanced economies between April and September 2024.”