© IE Online Media Services Pvt Ltd
Tags:
Journalism of Courage
UPSC Issue at a Glance is a new initiative of UPSC Essentials to focus your prelims and mains exam preparation on an issue that has been in the news. Every Thursday, cover a new topic in Q&A format and don’t miss MCQs, Points to Ponder and key takeaways. Also, don’t forget to check the answers of MCQs towards the end of the article. This week’s topic is Economic Survey. Let’s get started!
🚨 The Indian Express UPSC Essentials brings to you the July edition of its monthly magazine. Click Here to read. Share your views and suggestions in the comment box or at manas.srivastava@indianexpress.com🚨
What is the issue?
On 22nd July, Union Finance Minister Nirmala Sitharaman tabled the Economic Survey 2023-24 in the Parliament. The Economic Survey not only provides an analysis of the economy but also sheds light on the challenges faced by our economy and the required solutions. Thus, it is important to understand the Economic Survey from a broader perspective.
UPSC Syllabus:
Preliminary Examination: Current events of national importance and economic development
Mains Examination: GS-II, GS-III: Government Policies and interventions, Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment, Inclusive growth, and issues arising from it, Government Budgeting, Infrastructure.
Other areas of relevance: UPSC Aspirants will find it useful in Essays, and Current affairs for their Personality tests.
| What will you learn from this article? |
| 1. What is the Economic Survey? 2. What is the Economic Survey’s significance? 3. What are the key highlights of the Economic Survey 2023-24? 4. What are the main challenges highlighted in the Economic Survey and recommended solutions? |
The Economic Survey is a detailed report of the state of the national economy in the financial year that is coming to a close. It is prepared by the Economic Division of the Department of Economic Affairs (DEA) in the Union Finance Ministry, under the guidance of the Chief Economic Adviser. Once prepared, the Survey is approved by the Finance Minister.
The first Economic Survey was presented for 1950-51 and until 1964, it was presented along with the Budget.
Similarly, for the longest time, the survey was presented in just one volume, with specific chapters dedicated to different key sectors of the economy such as services, agriculture, and manufacturing, as well as key policy areas like fiscal developments, state of employment and inflation, etc. This volume carries a detailed statistical abstract as well. However, between 2010-11 and 2020-21, the survey was presented in two volumes. The additional volume carried the intellectual imprint of the CEA and often dealt with some of the major issues and debates facing the economy.
From 2022-23, the survey reverted to a single volume format, presumably because it was prepared and presented while there was a change in guard in the CEA’s office and the current CEA – V Anantha Nageswaran – took charge when the survey was released.
| Do you know? |
| The survey typically comes out on January 31, a day before the Finance Minister presents the Union Budget for the next financial year. However, in election years like 2024, the government takes a different route and presents a shorter report titled “The Indian Economy – A Review” and tables an interim budget in February. After the dissolution of the parliament and the conclusion of elections, the newly-elected government presents a comprehensive Economic Survey and Budget for the financial year. |
Points to Ponder:
— What is the difference between the Union Budget and the Economic Survey?
— Is there any constitutional mandate concerning the economic survey?
The Economic Survey is the most authoritative and comprehensive analysis of the economy that is conducted from within the Union government. Its observations and details provide an official framework for analysing the Indian economy.
The survey is a crucial document as it highlights some key concerns or areas of focus—for example, in 2018, the survey presented by the then CEA Arvind Subramanian was pink in colour to stress gender equality.
Is the economic survey binding on the government?
The government is not constitutionally bound to present the Economic Survey or to follow the recommendations that are made in it. If the government so chooses, it can reject all suggestions laid out in the document. But while the Centre is not obliged to present the survey at all, it is tabled because of the significance it holds.
Points to Ponder:
— How can understanding the economy help policymakers?
The Economic Survey 2023-24 has 13 chapters. The key highlights of the economic survey are:
1. Status of India’s economy
The Economic Survey 2023-24 conservatively projects a real GDP growth of 6.5 to 7 per cent. “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”. India’s real GDP grew by 8.2 per cent in FY24.
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”.
| Key Areas of Policy Focus in the Short to Medium Term |
| 1. Job and skill creation 2. Tapping the full potential of the agriculture sector 3. Addressing MSME bottlenecks 4. Managing India’s green transition 5. Dealing with the Chinese challenge 6. Deepening the corporate bond market 7. Tackling inequality 8. Improving our young population’s quality of health. |
The survey also pointed out the RBI data on India’s balance of payments, which shows a slight decline in investment interest of external investors from FY23 to FY24.
According to the Economic Survey, 55% of the tax collected accrued from direct taxes and the remaining 45% from indirect taxes. The current account deficit for FY24 is around 0.7% of GDP.
2. Inflation
The survey highlights that the inflation rate was stable, reflecting effective monetary policy management. The dynamics of core inflation in the post-pandemic world, indicate that while overall inflation is managed, certain sectors may still face upward pressures.
Food inflation remains a concern, with variations across states. The survey emphasizes the need for targeted interventions to manage food prices effectively, and makes a case for changing the inflation targeting framework of the central bank by excluding food inflation.
3. Agriculture & MSMEs
The survey highlights the potential for growth in agriculture, emphasizing the need for crop diversification and improved productivity through technological adoption.
The agriculture sector has been challenged by extreme weather events, depleted reservoirs, and crop damage, leading to impacts on farm output and food prices.
MSMEs are identified as crucial for economic growth, contributing significantly to employment and innovation. The survey points out the challenges they face, including access to finance and markets.
Various government initiatives aimed at supporting agriculture and MSMEs are discussed, including financial assistance and capacity-building programs.
4. Services and Infrastructure
The services sector continues to be a major driver of economic growth, contributing significantly to GDP. The survey notes the need for improving service quality and efficiency.
The survey discusses the critical role of infrastructure in facilitating economic growth and highlights ongoing public investment initiatives to enhance infrastructure.
Key challenges include financing, project execution, and addressing bottlenecks in infrastructure development that need strategic solutions.
5. India and World Trade
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 discusses how geopolitical changes and global trade dynamics are affecting India’s trade strategies and emphasises the need for diversification of trade partners.
India has moved up six places in the World Bank’s Logistics Performance Index, from 44th in 2018 to 38th in 2023, out of 139 countries.
Indian exporters face challenges related to tariff and non-tariff barriers. The survey calls for enhancing competitiveness to navigate these challenges effectively.
India received a record $83 billion in remittances in 2023, making it the top recipient globally.
6. Employment and Skill Development
The Periodic Labour Force Survey indicates a surge in agricultural employment, attributed to reverse migration and increased female participation in the labor force.
The survey estimates that India will require significant job creation until 2036 to accommodate its growing workforce, emphasising the need for strategic planning in employment generation.
| Economic Survey: Spelling out the challenges |
| The Economic Survey 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 grows at just 4 per cent. |
The survey suggests that collaboration between government, academia, and the private sector is essential for effective skill development.
7. Social Sector and Sustainability
The survey assesses India’s progress toward achieving Sustainable Development Goals (SDGs), highlighting areas of improvement and ongoing challenges in social welfare and economic empowerment.
The survey emphasises the importance of social welfare programs aimed at empowering marginalised communities, particularly women and rural populations.
Despite progress, the survey identifies persistent challenges in ensuring inclusive growth and equitable access to resources.
8. Energy and Climate Change
The survey outlines India’s commitment to transitioning to renewable energy sources, with a focus on solar and wind energy. It emphasises the need for a balanced energy mix to ensure energy security.
| Economic Survey: Spelling out the challenges |
| The Economic Survey has pointed to flaws and inequities in the global climate action regime, and suggested alternative pathways that incorporate lifestyle and behavioural changes. |
India’s climate action strategies are discussed, highlighting adaptation measures and the importance of low-carbon development pathways. The survey reviews India’s international commitments related to climate finance and the need for collaborative efforts to address climate change challenges effectively.
Points to Ponder:
— What initiatives have been taken by the government to promote higher private sector investment?
— What are the emerging challenges to the Indian economy?
The economic survey highlighted the challenges faced by the Indian economy and provided some solutions for them.
Challenges
1. Tepid private investment: Udit Mishra Writes– “The Survey emphasised that the corporate sector had not responded, despite the Union government cutting taxes in September 2019 to facilitate capital formation. “…Between FY20 and FY23, the profit before taxes of the Indian corporate sector nearly quadrupled…Hiring and compensation growth hardly kept up with it,” the CEA stated in the Survey.”
| Economic Survey: Spelling out the challenges |
| The Economic Survey notes that India’s journey to become Viksit Bharat by 2047 will be more challenging than that of China. China benefited from a benign geopolitical environment and the high noon of globalisation. Both conditions no longer exist. Alongside, there is the threat from climate change and global warming and the advent of Artificial Intelligence. |
2. Challenge of Unemployment: The Economic survey notes that the Indian economy needs to generate an average of nearly 78.5 lakh jobs annually until 2030 in the non-farm sector to cater to the rising workforce.
3. China challenge: India’s over-dependence on China has become a big challenge for India. The Economic Survey highlights how India continues to be overly dependent on China for imports, especially for renewable energy. The Chief Economic Advisor (CEA) also stated that China has not let go of the low-skills manufacturing space that India wanted to occupy.
4. Threat from Climate Change and AI: The Economic Survey highlights the threat from climate change and global warming and the advent of Artificial Intelligence. The Survey notes that these forces “will create barriers and hurdles” for India to sustain high growth rates “in the coming years and decades”.
The Survey notes that while there has been a boom in telecommunications and Internet facilitated business process outsourcing (BPO), the next wave of technological evolution might bring the curtains down on it.
5. Data deficiency: Udit Mishra Writes– A constant refrain against the government has been the lack of good quality and timely data especially related to employment. In the Survey, the CEA accepted that this was indeed a gap that was holding back a proper analysis. “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,” it stated.
6. Lifestyle-related Challenges: The Economic Survey also highlights lifestyle-related challenges. It says that “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.”
Solutions
The Economic Survey puts forth a host of policy measures and strategies to tackle pressing issues.
1. Removing regulatory bottlenecks: “The Licensing, Inspection and Compliance requirements that all levels of the government continue to impose on businesses is an onerous burden. Relative to history, the burden has lightened. Relative to where it ought to be, it is still a lot heavier,” stated the CEA.
2. Farm sector as the saviour: Udit Mishra Writes– Traditional economic theories suggest that as economies develop they make a structural transition from agriculture to manufacturing and services. But the Survey states that “trade protectionism, resource-hoarding, excess capacity and dumping, onshoring production and the advent of AI are narrowing the scope for countries to squeeze out growth from manufacturing and services” and “forcing us” to turn conventional wisdom on its head. In other words, the CEA states, “A return to roots, as it were, in terms of farming practices and policy making, can generate higher value addition from agriculture, boost farmers’ income, create opportunities for food processing and exports and make the farm sector both fashionable and productive for India’s urban youth”.
3. Lifestyle changes by the private sector: “India’s traditional lifestyle, food and recipes have shown how to live healthily and in harmony with nature and the environment for centuries. It makes commercial sense for Indian businesses to learn about and embrace them, for they have a global market waiting to be led rather than tapped,” writes the CEA.
Points to Ponder:
— What are the challenges and issues faced by various sectors in India?
— What initiatives have been taken by the government to tackle the challenge of unemployment?
Prelims
(1) Consider the following statements:
1. The Economic Survey of India is prepared by the Economic Division of the Department of Economic Affairs.
2. Article 112 of the Constitution of India provides provisions concerning the economic survey.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
(2) In a given year in India, official poverty lines are higher in some States than in others because: (UPSC CSE 2019)
(a) Poverty rates vary from State to State
(b) Price levels vary from State to State
(c) Gross State Product varies from State to State
(d) Quality of public distribution varies from State to State
(3) Increase in absolute and per capita real GNP do not connote a higher level of economic development, if: ( UPSC CSE 2018)
(a) Industrial output fails to keep pace with agricultural output.
(b) Agricultural output fails to keep pace with industrial output.
(c) Poverty and unemployment increase.
(d) Imports grow faster than exports.
Mains
1. “Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product(GDP) in the post-reform period” Give reasons. How far are the recent changes in Industrial Policy capable of increasing the industrial growth rate? ( UPSC CSE 2017)
2. Do you agree that the Indian economy has recently experienced a V- shapes recovery? Give reasons in support of your answer. ( UPSC CSE 2021)
| ANSWER KEY |
|
(Sources: Economic Survey 2023-24, Economic Survey 2023-24 to be released today: Why it matters, what to expect, Economic Survey 2023-24 Highlights: GDP growth projected at 6.5-7%; RBI expects inflation to be 4.5% in FY25, Economic Survey: Spelling out the challenges, Explained: Key takeaways from the 2023-24 Economic Survey)
Also Read:
Share your views and suggestions at roshni.yadav@indianexpress.com
Subscribe to our UPSC newsletter and stay updated with the news cues from the past week.
Stay updated with the latest UPSC articles by joining our Telegram channel – Indian Express UPSC Hub, and follow us on Instagram and X.
https://www.youtube.com/watch?v=WJLhPd8bUaQ?si=KmaTSDkc_ZiRUfp4
