Indian economy on strong wicket; eyes 7% GDP growth

Recovery needs 'heavy lifting' on the domestic front, Economic Survey says

Issac John

Published: Mon 22 Jul 2024, 5:51 PM

The Indian economy is “on a strong wicket and stable footing” with a projected real GDP growth of 6.5 per cent to 7.00 per cent in 2024-25, according to the Economic Survey unveiled on Monday ahead of Modi 3.0 budget presentation on Tuesday.

The survey, tabled by Finance Minister Nirmala Sitharaman, said the third largest Asian economy, which is on track to replace Japan as the third largest global economy before 2030, demonstrates resilience in the face of geopolitical challenges, adding that the headline inflation rate is “largely under control.0” It adds that the Reserve Bank of India expects inflation to be 4.5 per cent in FY 25 and 4.1 per cent in FY26.

The survey states that for recovery to be sustained, there has to be “heavy lifting on the domestic front” as the “environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate.”

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“Going forward, the government’s focus must turn to bottom-up reform and the strengthening of the plumbing of governance so that the structural reforms of the last decade yield strong, sustainable, balanced, and inclusive growth,” the survey highlighted.

The survey listed key policy focus areas in the short to medium term, including generating productive employment, addressing the skill gap challenge, tapping the full potential of the agriculture sector through reforms such as land consolidation, addressing MSME bottlenecks, managing India’s green transition, dealing deftly with the Chinese conundrum, deepening the corporate bond market, tackling inequality, and improving the quality of health for the young population.

Chief Economic Advisor V Anantha Nageswaran advocated for a nationwide discussion on the agriculture sector, stressing the need for policy re-orientation despite current subsidies and support measures.

Addressing the media, Nageswaran expressed confidence in achieving the 7.0 per cent growth target set in the survey and noted that while meeting this target is attainable, there are several risk factors to consider, such as unpredictable weather patterns, growing financial market uncertainties in developed economies, and geopolitical complexities.

Nageswaran observed that although the government provides extensive support to farmers through subsidies on water, electricity, and fertilizers, as well as income tax exemptions and minimum support prices, there is still room for improvement in policy implementation. "The case can be made that farmers might benefit from a re-orientation of existing and new policies," the CEA stated.

The survey estimated that India will require significant job creation until 2036 to accommodate its growing workforce, emphasising the need for strategic planning in employment generation.

India’s trade has stood tall amidst global turmoil, with a favorable current account balance, according to the survey. It indicates a reduction in the trade deficit compared to previous years.

The survey said India needs to recognise and address challenges posed by its dependence on China for critical minerals and examine the implications of phasing down coal on bank balance sheets as it accelerates its green transition.

The survey discussed how geopolitical changes and global trade dynamics are affecting India’s trade strategies and emphasised the need for diversification of trade partners.

Indian exporters face challenges related to tariff and non-tariff barriers. The survey calls for enhancing competitiveness to navigate these challenges effectively.

The survey emphasised the importance of social welfare programs aimed at empowering marginalised communities, particularly women and rural populations. Despite progress, the survey identified persistent challenges in ensuring inclusive growth and equitable access to resources