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Union Finance Minister Nirmala Sitharaman Monday tabled the Economic Survey 2023-24, which projects a real GDP growth of 6.5 to 7 per cent. 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 Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges,” the survey states. It adds that the headline inflation rate is “largely under control”, however, the “inflation rate of some specific food items is elevated”. On India’s economy For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate. RBI data on India’s Balance of Payments shows us that the investment interest of external investors, measured in terms of dollar inflows of new capital, was USD45.8 billion in FY24 compared to USD47.6 billion in FY23. This slight decline is in line with global trends. The Survey conservatively projects a real GDP growth of 6.5–7 per cent, with risks evenly balanced, cognizant of the fact that the market expectations are on the higher side. Any escalation of geopolitical conflicts in 2024 may lead to supply dislocations, higher commodity prices, reviving inflationary pressures and stalling monetary policy easing with potential repercussions for capital flows. This can also influence RBI’s monetary policy stance. On employment The lack of availability of timely data on the absolute number of (formal and informal) jobs created even at annual intervals, let alone at higher frequencies, in various sectors – agriculture, industry including manufacturing and services – precludes an objective analysis of the labour market situation in the country. The Annual Survey of Unincorporated Enterprises for 2022-23 shows that overall employment in these enterprises fell from 11.1 crore in 2015-16 to 10.96 crores. There was a reduction of 54 lakh workers in manufacturing but the expansion of the workforce in trade and services gained in jobs limited the overall reduction in the number of workers in unincorporated enterprises to around 16.45 lakhs between these two periods. India suffered two big economic shocks (Bad debts and Covid pandemic) in quick succession. So, it is difficult to conclude that the Indian economy’s ability to create employment is structurally impaired. Nonetheless, going forward, the task is cut out. On inflation Assuming a normal monsoon and no further external or policy shocks, the RBI expects headline inflation to be 4.5 per cent in FY25 and 4.1 per cent in FY26. IMF has projected an inflation rate of 4.6 per cent in 2024 and 4.2 per cent in 2025 for India. None
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