Economic Survey signal: Keep food prices out of retail inflation while deciding interest rates 

The anticipated monetary policy easing by the Reserve Bank of India (RBI) has been delayed, the Economic Survey for 2023-24 has made a case for changing the inflation targeting framework of the central bank by excluding food prices.

SURVEY WISDOM

• The government should loosen the regulatory grip
• Private sector salaries not commensurate with its profits
• Obesity, screen time, unhealthy food a 'lethal mix' that can undermine economic potential
• Risking economic welfare in the developing world for meeting climate targets "flawed"
• Al casts a "huge pall of uncertainty" for workers across skill segments 

'Investor overconfidence in markets serious concern'

The Economic Survey 2023-24 has cautioned against the possibility of overconfidence leading to speculation and the expectation of even greater returns in the stock market. 

This is a "serious concern" as it may not align with the real market conditions and the significant increase in retail investors in the market calls for careful consideration, the survey has warned. 

15% PMAY-U beneficiaries minorities, says Ministry

A little over 15% of the beneficiaries who have got houses under the Pradhan Mantri Awas Yojana-Urban (PMAY-U), so far, come from religious minority communities, according to a reply by the Ministry of Housing and Urban Affairs to a question in the Rajya Sabha. 

Replying to a question by nominated MP Satnam Singh Sandhu, Housing and Urban Affairs Minister of State Tokhan Sahu said 118.64 lakh houses had been sanctioned under PMAY-U, which was launched in 2015, based on proposals submitted by states and UTs as of July 15. Out of those, 85.04 lakh houses had been completed or delivered to the beneficiaries.

No case is made out for special category status for Bihar, Govt tells Parliament

On the eve of the Union Budget presentation, the government told Parliament on Monday that the case for special category status for Bihar is not made out.

"Earlier, the request of Bihar for special category status was considered by an inter-ministerial group (IMG), which submitted its report on March 30, 2012.

The IMG came to the finding that based on existing NDC (National Development Council) criteria, the case for special category status for Bihar is not made out," Union Minister of State for Finance Pankaj Chaudhary told Parliament while answering a question by JD(U) MP Rampreet Mandal. 

Budget will lay the foundation for Viksit Bharat dream, says Modi

A day before the first Union Budget, Prime Minister Narendra Modi said that the Budget will set the direction of the next five years and will lay a strong foundation for the dream of Viksit Bharat by 2047.

At the beginning of the Budget session, Modi said, "We are moving ahead with the goal of gradually implementing the guarantees that I have been giving to the people of the country. 

This Budget is an important budget of Amrit Kaal. We have got an opportunity of five years and the Budget will also determine the direction of our work for those five years. 

This Budget will lay a strong foundation for fulfilling our dream of a developed India by 2047, when we will be celebrating 100 years of Independence. 

NREGS demand not a true indicator of rural distress: Survey

The demand under MGNREGS is not a real indicator of rural distress but is rather predominantly linked to a state's institutional capacity and, to some extent, different minimum wages and other considerations, said the Economic Survey 2023-24 tabled by Finance Minister Nirmala Sitharaman in Lok Sabha.

Noting that a state's institutional capacity is "crucial" for effectively tapping MGNREGS funds, the survey, citing several studies, said literature establishes a link between per-capita income and institutional quality.

And, discussing factors that explain differences in MGNREGA work demand across states, it said MGNREGS fund usage and employment generation are not proportional to poverty levels. Additionally, it said, "calculations reveal there is little correlation between MGNREGS fund usage and rural unemployment rates." 

'Worth considering incentives to states for modernising agricultural marketing'

The economic Survey recommended incentivising states for interventions to modernise agricultural marketing as recommended by the 15th Finance Commission.

According to the survey, implementing the e-National Agriculture Market (e-NAM), supporting Farmers Producer Organisations (FPOs) and enabling cooperatives to participate in agri-marketing could enhance market infrastructure and facilitate better price discovery. 

Environment of adverse trade may ease this year

The adverse trade environment last year that resulted in a 5% decline in India's merchandise exports in FY24 is expected to ease this year and the subsequent year. However, geopolitical tensions and policy uncertainty could limit the scope of trade recovery, the Economic Survey said.

While export growth is expected to improve in several economies as external demand for goods picks up, "food and energy prices could again spike" due to geopolitical events and climate disturbances, it said, adding restrictive trade practices increasingly adopted by countries are leading to higher prices as supply chains have become increasingly complex.

International trade has contributed to India's economic growth as rising services exports despite a decline in merchandise imports have cushioned the overall trade deficit from $121.6 billion in FY23 to $78.1 billion in FY24 and improved India's current account deficit (CAD), the survey noted.

Pvt investment, lack of quality data key issues facing the infra sector

India must boost private sector participation to maintain its infrastructure growth momentum, which has been largely driven by public sector investment, according to the Economic Survey. 

The survey also called for improving the quality of data on infrastructure development, financing, and utilisation to drive more effective policy-making and identified delays in land acquisition and obtaining land-related clearances as key challenges for the sector. 

Govt, people need to focus on diet, mental health

This year's Economic Survey takes note of the economic impact of an increasing burden of non-communicable diseases and mental health issues, stating: "For India's working-age population to be gainfully employed, they need skills and good health. Social media, screen time, sedentary habits, and unhealthy food are a lethal mix that can undermine public health and productivity and diminish India's economic potential."

The report states that obesity and diabetes are on the rise in the country. Citing data from the National Family Health Survey (NFHS-5 in 2019 and 2021), the survey says obesity has increased by four percentage points in men and 3.4% in women over the previous round of the survey in 2015-16. -

SPELLING IT OUT

The Economic Survey 2023-24, the annual flagship document of the finance ministry, is remarkably realistic and forthright in its assessment of the state of the Indian economy and its growth prospects. 

The Survey has carefully documented economic progress over the years, especially the rebound from the depths of the pandemic, and analysed in detail the challenges that lie ahead. 

It captures the paradox of the Indian corporate sector "swimming in excess profits" and banks' interest margins rising to a "multi-year high", while the economy witnesses subdued private sector investments, limited growth in more productive employment opportunities, and private consumption growing at just 4 per cent.

Who's the greenest of all?

Developing countries like India stand on precarious ground. Sustainable in ethos, we find ourselves surprised at the crossroads of having to address economically what we have always believed and practised philosophically. 

As the fifth largest economy in the world, expected to become the third largest before 2030, our energy needs are expected to grow about 1.5 times faster than the global average in the next 30 years. 

Therefore, our developmental requirements stand head-to-head with our climate commitments, and we have to continually resist being swayed by the characterisation of being one

of the largest polluters. It's a delicate balance that we must strike. 

Survey Signals for Budget

At 8.2 PER cent, India's GDP growth in fiscal 2024 was 170 basis points higher than what last year's Economic Survey had projected. A subdued agricultural sector and a host of global risks failed to dent the growth momentum. 

The higher growth, together with improved tax collections and extra dividend payout from the Reserve Bank of India (RBI), has increased the fiscal space. External buffers are also strong owing to a low current account deficit and ample forex reserves. 

Moreover, high-frequency data for the first quarter of this fiscal reflects a healthy growth trajectory. 

The S&P Global Purchasing Managers' Index (PMI) was in a healthy expansion zone, at 57.3 and 58.1 for manufacturing and services, respectively. Balance sheets of corporates and banks are also well-placed to support growth. 

FY25 growth seen at 6.5-7%

India's Gross Domestic Product (GDP) is seen growing "conservatively" at 6.5-7 per cent in real terms in FY25, with prospects for continued strong growth on the back of improved balance sheets in the private sector, a likely pickup in rural demand amid predictions of a normal rainfall forecast and a likely increase in merchandise exports with improving growth prospects in advanced economies, the Economic Survey for 2023-24 tabled in Lok Sabha stated.

"We are not pessimistic, we are very optimistic about growth but we are also mindful of the challenges...about the way the monsoon has progressed since we wrote the interim economic survey in January where we were confident about 7 per cent (growth). 

Since then the global environment has become even more polarised and financial market elevations are much more elevated" 

India must plug itself into China's supply chain, attract investments

Amid a rapidly rising trade deficit with China despite efforts to curb imports and investments in the backdrop of the Galwan clash in 2020, the Economic Survey has advocated attracting investments from Chinese companies to boost exports. 

The Survey suggested the change in stance as several countries such as Mexico, Vietnam, Taiwan and Korea are benefiting from China plus one strategy pursued by Western firms with a simultaneous rise in investment from China.

The Survey suggested that the China plus one phenomenon may not result in a total movement of trading relations away from China and that India should find the "right balance" between importing goods from China and importing capital (FDI) from China. 

It further said that Chinese dominance over several products creates a risk of economic coercion. 

Govt servants and RSS activities: What rules say

The centre has decided that the "mention of Rashtriya Swayamsevak Sangh (RSS)" as an organisation that government officials cannot be part of, should be "removed". 

This bar on officials participating in activities of the RSS first came into effect almost six decades ago. 

Following a directive issued by the Department of Personnel and Training (DoPT) earlier this month, employees can now participate in the activities of the RSS without attracting disciplinary action under the rules of conduct applicable to them.

What is the DoPT's directive?

The DoPT, which manages the central government's human resources, said the government has "reviewed" instructions issued in 1966, 1970, and 1980, "and it has been decided to remove the mention of Rashtriya Swayamsevak Sangh (RSS) from the impugned OMs (Official Memorandums) dated 30.11.1966, 25.07.1970 and 28.10.1980". 

Key Takeaways from Economic Survey

The Economic Survey for 2023-24 stands out from previous economic surveys in that it provides a more realistic picture of the challenges before India's economic growth. 

As such, despite India's GDP growing at more than 8% in FY 2023-24, the survey pegs the GDP growth rate for the current financial year (FY 2024-25) between 6.5% and 7%.