The Economic Survey 2023-24, presented by Finance Minister Nirmala Sitharaman, highlights India’s impressive economic recovery and resilience. Despite global challenges, MSMEs flourished with strong government support, and service exports hit record highs. The survey reports an 8.2% growth in real GDP for FY24, supported by stable fiscal and monetary policies. Public investment and private sector capital expansion have been essential, with MSMEs contributing 30% to GDP and creating millions of jobs. Service exports reached a record $341.1 billion, while the Current Account Deficit improved significantly, underscoring India’s robust economic performance.
The Economic Survey 2023-24 was presented by the Financial Minister Nirmala Sitharaman on Monday, ahead of the expected Union Budget 2024-25. The survey highlighted the resilience and adaptability of the country’s economy post-covid era, revealing key insights into inflation, investments, the role of MSMEs, and the changing scenario of merchandise and service exports.
In FY24, India’s economy continued its recovery from the Covid-19 pandemic, expanding by an estimated 8.2% in real GDP. This growth trajectory follows strong performances of 9.7% and 7.0% in the preceding two years, supported by stable fiscal and monetary policies.
While headline inflation has remained under control overall, certain food items have experienced higher inflation rates, reflecting a global trend exacerbated by climate change impacts such as heat waves, irregular monsoons, and extreme weather events.
Public investment has played a crucial role in fostering capital formation, complemented by increased private sector investment since FY22. Early data for FY24 suggests that private sector capital expansion continues, albeit at a moderated pace in some sectors. Despite challenges such as higher interest rates in developed countries and geopolitical uncertainties, India remains an attractive investment destination. Foreign Direct Investment totaled US$ 45.8 billion in FY24, slightly lower than US$ 47.6 billion in FY23, in line with global trends.
Agriculture policy remains pivotal, with significant government support through subsidies, Minimum Support Prices (MSP) for essential commodities, and financial assistance schemes. There is ongoing dialogue aimed at optimizing these policies for more effective outcomes.
The Economic Survey places emphasis on the pivotal role of Micro, Small, and Medium Enterprises (MSMEs) in India’s economic landscape, contributing approximately 30% to the GDP, 45% to manufacturing output, and employing around 11 crore people. The government has implemented several proactive measures to bolster the sector, including the allocation of 5 lakh crore under the Emergency Credit Line Guarantee Scheme for MSMEs and other businesses, alongside a 50,000 crore equity infusion through the MSME Self-Reliant India Fund. New criteria for MSME classification have been introduced, and a comprehensive program named ‘Raising and Accelerating MSME Performance‘ has been launched with a 5-year outlay of 6,000 crores. Furthermore, the Udyam Assist Platform, launched on January 11, 2023, aims to formalize informal Micro Enterprises, facilitating their access to benefits under Priority Sector Lending. The survey emphasizes that while addressing the credit gap remains crucial, deregulation, enhancing physical and digital connectivity, and formulating an effective export strategy are equally important to enable MSMEs to broaden market exposure and scale effectively.
Key Trends
Source: pib
In FY24, India’s merchandise exports continued to show moderation due to weaker global demand and ongoing geopolitical tensions, as highlighted in the Economic Survey 2023-24. However, the growth in India’s merchandise imports saw a steeper decline, primarily influenced by falling commodity prices, leading to a reduced trade deficit for the fiscal year.
On the other hand, India’s service exports remained strong, achieving a record high of US$ 341.1 billion in FY24. Overall, exports (including both merchandise and services) in FY24 grew marginally by 0.15%, while total imports declined by 4.9% despite robust domestic market demand. Furthermore, net private transfers, predominantly driven by remittances from overseas, increased to US$ 106.6 billion during the fiscal year. Consequently, the Current Account Deficit (CAD) improved to 0.7% of GDP in FY24, a significant enhancement from the 2.0% deficit recorded in FY23.
Sectoral Composition
A bifurcation of merchandise exports into POL (Petroleum, Oil, and Lubricants) and non-POL products shows that exports across both categories have declined in FY24. The fall in POL exports is mainly due to a decline in global petroleum product prices. Even though the volume of POL exports increased from 99 million tonnes in FY23 to 108 million tonnes in FY24, the value of exports declined by 13.7%, from US$ 97.5 billion to US$ 84.2 billion during the same period. However, in the last six years, POL exports have increased by 80.8% from US$ 46.6 billion in FY19 to US$ 84.2 billion in FY24, with the share in global POL exports (HS 2710 to 2713) rising from 4.3% in 2018 to 4.8% in 2022.
Under non-POL products, exports of engineering goods, electronic goods, and drugs & pharmaceuticals increased in FY24 on a YoY basis. In contrast, agriculture and allied products, chemicals, plastics, and textiles have seen a decline in exports. Over the past six years, the composition of exports across these categories has changed. Engineering goods dominated merchandise exports in FY19, accounting for 25.3% of total exports. This trend has continued, with engineering goods exports reaching US$ 109.3 billion in FY24, maintaining a 25% share. Agri and allied products also maintained a steady share. From US$ 36.6 billion in FY19, their exports peaked at US$ 52.7 billion in FY23 before slightly declining to US$ 48.3 billion in FY24, holding around an 11% share in merchandise exports. Chemical and plastic exports experienced notable growth, rising from US$ 31 billion in FY19 to US$ 37.5 billion in FY24.
Despite this increase in value, their share declined from 9.4% in FY19 to 8.6% in FY24. The textile sector witnessed a relative decline in prominence. Along with a decline in their exports from US$ 37.5 billion in FY19 to US$ 34.8 billion in FY24, their share in total exports also dropped significantly from 11.4% to 8% during the same period. This reduction reflects shifting priorities and emerging sectors within India’s export framework and likely indicates underlying challenges in the sector that need addressing.
India’s share in world electronics exports (captured by incorporating HS chapters 84, 85, and 90) has improved from 0.63% in 2018 to 0.88% in 2022. Consequently, India’s rank rose from 28th in 2018 to 24th in 2022 in global electronics exports. The share of electronics goods in India’s merchandise exports increased from 2.7% in FY19 to 6.7% in FY24.
India maintained a strong foothold in the drugs and pharmaceuticals sector. The sector’s share in India’s exports grew from 5.8% in FY19 to 6.4% in FY24, with exports rising from US$ 19.1 billion in FY19 to US$ 27.9 billion in FY24.
Overall, the Economic Survey 2023-24 shows India’s strong economic recovery with notable GDP growth, controlled inflation, and increased investments. Key areas of focus include MSMEs, agriculture, and energy diversification, reflecting the government’s commitment to sustainable growth. Despite global challenges, India’s service exports hit record highs, and the merchandise trade deficit decreased. The Indian export is changing, especially in engineering goods, electronics, and pharmaceuticals. These insights set the stage for the upcoming Union Budget 2024-25, aiming to build on these achievements and introduce more reforms to boost economic growth and resilience.
