Decoding India’s Mini Economic Survey 2024

Kotak Insights | Date 02/02/2024

Every year, a day before the Union Budget announcement, the Ministry of Finance of India releases a report called the Economic Survey.

It offers insights into India's economic trends and aids resource allocation for the Union Budget.

But 2024 stood out as an exception.

Instead of the usual Economic Survey, the Centre released a shorter version of the report titled 'Indian Economy – A Review'. And guess what? - It brings good news for the Indian economy.

The report projects India's growth into a $5 trillion economy within the next 3 years, with aspirations to reach $7 trillion by 2030.

What gives? To find out, let us look at some of the key highlights from this report and understand its significance in the context of the Interim Budget announcements.

The Economic Survey’s Role

Let’s first start with the Economic Survey and why it is prepared.

Typically, the Economic Survey outlines economic trends in India, assisting in the allocation of resources for the Union Budget.

It analyses various economic aspects like agricultural and industrial production, employment, infrastructure, money supply, prices, imports, exports, foreign exchange reserves, and other similar factors that have a bearing on the Budget.

It is presented in Parliament before the budget for economic planning.

However, the government didn’t present the Economic Survey this time because 2024 is an election year. In these cases, the regular Budget process may be disrupted if there is a change in the government after elections.

It is this same reason why 2024 is going to see two budgets – an Interim Budget and a detailed Union Budget which will be announced after the elections.

So, to inform the Interim Budget, the government released 'Indian Economy – A Review', a comprehensive report reviewing India's economic journey over the past decade.

Here are the key points from the 74-pager document:

A Decade of India’s Resilience

At its core, the report focuses on India’s overall growth in the last decade and how it is set to grow in the next fiscal year.

What did the report find out?

Well, over the last 10 years, the Indian economy has demonstrated remarkable resilience and growth.

In 2014, India faced numerous economic challenges, including high inflation and fiscal deficits. However, the decade that followed marked a transformative era.

The government's strategic reforms and policies led to stable, sustainable growth, transforming the nation's economic landscape.

Here are a few important factors behind this growth:

Key Drivers of the Indian Economic Growth

1. Structural Reforms: The government introduced significant structural reforms that strengthened macroeconomic fundamentals. These reforms included the Goods and Services Tax (GST), Insolvency and Bankruptcy Code (IBC), and liberalisation in various sectors.
2. Digital Revolution: India's digital infrastructure saw massive growth in the last couple of years, enhancing financial inclusion and creating new economic opportunities. Initiatives like Aadhar and digital payment platforms revolutionised the way businesses and consumers interact in India.
3. Infrastructure Development: The government focused on building physical and digital infrastructure, improving connectivity, and enhancing the competitiveness of the manufacturing sector.
4. Financial Sector Revitalization: The health of the financial sector improved significantly in the last couple of years. Banks' balance sheets strengthened, and credit growth in the non-food sector saw an upswing. Policy interventions played a crucial role in this.
5. Inclusive Development: Policies aimed at financial inclusion resulted in significant improvements in household financial health. The Jan Dhan Yojana scheme played a crucial role in this aspect by bringing financial services to the underserved population.

Here are a few other key highlights to note…

Global Economy and India

• Economic Growth Projection: The Indian economy is expected to achieve a growth rate of 7% or higher for FY24, and there are predictions of sustaining this growth in FY25. This would mark four consecutive years of robust growth post-pandemic.
• Global Challenges and Trends: The global economy is facing challenges such as supply chain disruptions, a slowdown in trade, and the impact of Artificial Intelligence. India is seen as resilient, having overcome past shocks and is navigating these challenges effectively.
• Shift in Global Manufacturing: The era of hyper-globalization in global manufacturing is ending. Governments are focusing on onshoring and friend-shoring, impacting transportation, logistics costs, and final product prices. India is urged to lower logistics costs and invest in product quality to maintain and expand market share.
• AI and Energy Transition: The emergence of Artificial Intelligence poses challenges to services trade and employment. Additionally, there is a significant focus on the energy transition, with international pressure on developing nations to reduce carbon emissions. India is handling these challenges skillfully, balancing economic growth with climate-related initiatives.

Conclusion: Amrit Kaal Ready

All that says that India is on its way to achieve the Amrit Kaal vision laid by Prime Minister Narendra Modi where the nation will move forward towards attaining resolutions made for Aatmanirbhar Bharat in the next 25 years.

Here’s what the report states, ‘India embarks on her ‘Amrit Kaal’ with confidence and the attitude that challenges to growth and inclusive development are stepping stones and not obstacles.’

As we step into the future, India's economy is poised for sustained growth, backed by a robust digital foundation and continued focus on reforms. The government's commitment to building infrastructure and fostering inclusive development ensures that the growth is balanced and sustainable.

All that states that India has come along a long way growing in the last 10 years and the coming decade seems promising.

India has invested significantly in infrastructure in the last decade, leading to a 3.3X increase in public sector capital investment.

The financial sector is healthy, with strong non-food credit growth. The pursuit of inclusive development is evident in improved household financial health, job creation, declining unemployment rates, and progress in education and healthcare indicators.

Despite global challenges like the COVID-19 pandemic and geopolitical tensions, the Indian economy showcased its inherent resilience. The government's efficient management of these crises, adept handling of crude oil supply, along with its focus on economic reforms, played a pivotal role in sustaining growth.

In all, the past decade has been a testament to India's economic resilience and potential.

With strategic reforms, inclusive policies, India has not only overcome its challenges but has also positioned itself as a global economic powerhouse, ready to take on future challenges with confidence.

It would be interesting to see how the coming decade unfolds for India!

For more insights on the Indian economy and the Budget 2024 announcements, check out #BeyondTheBudget.

See you with another interesting market story next week.

Until then - Happy learning!

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Sources: Kotak Securities, Department of Economic Affairs, Economic Times

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.