STATE OF THE ECONOMY:

01
STEADY AS SHE GOES CHAPTER

India’s calibrated response to the pandemic on the economic front included three salient
components. The first has been the focus on public spending on infrastructure, which
kept the economy afloat by creating a strong demand for jobs and industrial output
and triggered a lagged yet vigorous private investment response. Stronger balance
sheets of the financial and non-financial private sector helped, aided by a decade of
supporting initiatives by the Government and the Reserve Bank of India. The second has
been partly a natural response of business enterprise and public administration amidst
adversities, i.e., digitalisation of service delivery. The public policy focus and nurturing
of processes and frameworks in digital technology greatly helped this irreversible and
transformational change. The third has been embodied in the Atmanirbhar Bharat
Abhiyan in terms of targeted relief to different sectors of the economy and sections of
the population, and structural reforms that assisted a firm recovery and increased the
medium-term growth potential.

Global troubles, supply chain disruptions, and vagaries of monsoons intermittently

stoked domestic inflationary pressures, which were, to a great extent, managed by
administrative and monetary policy responses. The fiscal balances of the general
government—central and State Governments taken together - have improved
progressively despite expansionary public investment. Tax compliance gains driven
by procedural reforms, expenditure restraint, and increasing digitisation helped
India achieve this fine balance. The external balance has been pressured by subdued
global demand for goods, but strong services exports largely counterbalanced this.
Global output is now somewhat more resilient than in 2022, inflationary pressures are
shrinking, and trade is set to recover, should there be no further geo-political shocks
or flare-ups. However, the chances of geopolitical disturbances and conflicts have only
gone up in recent times.

The net impact of these developments has been that the Indian economy recovered and
expanded in an orderly fashion in the last three years. The real GDP in FY24 was 20
per cent higher than its level in FY20, a feat that only a very few major economies
achieved, while also leaving a strong possibility for robust growth in FY25 and beyond.
Growth has been inclusive with a reduction in unemployment and multi-dimensional
poverty and an increase in labour force participation. Overall, the Indian economy
looks forward to FY25 optimistically, anticipating broad-based and inclusive growth.
Economic Survey 2023-24

GLOBAL ECONOMIC SCENARIO

1.1 After a year marked by global uncertainties and volatilities, the global economy achieved
greater stability in 2023. While uncertainty stemming from adverse geopolitical developments
remained elevated, global economic growth was surprisingly robust. As per the World Economic
Outlook (WEO), April 2024 of the International Monetary Fund (IMF)1, the global economy
registered a growth of 3.2 per cent in 2023, though marginally lower than in 20222 and average

Chart
 I.1: Growth: Context matters.

Macroeconomic and political situation of the global economy
2011 to 2019 average
5.2

8.7

6.8 3.7
3.5
3.5

3.2 3.5
0.5

2022 2023
2022 2023 2022 2023
  Export volume growth of goods
Real GDP growth (%) CPI Inflation (%) and services (%)

2011 to 2019 average

1.8
1.6 2.2
1.5
157.6

121.7

95.2

-0.1
-0.6
2022 2023
2022 2023 2022 2023
Global Supply Chain Pressure
FDI Outflows (% of GDP) Geopolitical Risk Index
Index

Source: World Economic Outlook Database, April 2024, IMF, UNCTADstat database, Federal Reserve Bank of
New York, Economic Policy Uncertainty; Notes3,4

1 International Monetary Fund, World Economic Outlook, April 2024, page 10 (https://tinyurl.com/38cuxrbw)
2 International Monetary Fund, World Economic Outlook, October 2023, page 12 (https://tinyurl.com/y3xdpktk)
3 Geopolitical Risk Index is based on a tally of newspaper articles covering geopolitical tensions. Ten newspapers
are considered. The index is calculated by counting the number of articles related to adverse geopolitical events
in each newspaper for each month (as a share of the total number of news articles). A lower value indicates lower
risk.
4 Global Supply Chain Pressure Index readings measure standard deviations from the index’s historical average. A
higher value indicates increased supply chain pressure.

2
 State of the Economy

for 2011-19 but higher compared to the projection of 2.8 per cent as per the April 2023 WEO5.
The context in which the growth of 3.2 per cent in 2023 has been achieved is markedly different
compared to the 2011-19 period. Inflationary pressures have been significantly higher on
account of the persistence of core inflation. Global trade moderated due to rising geopolitical
tensions, cross-border restrictions and slower growth in advanced economies (AEs). The
muted trade growth occurred despite the easing of supply chain pressures. Further, geopolitical
developments and monetary policy changes across countries resulted in increased caution
among investors, culminating in moderation in foreign direct investment (FDI) flows.

Chart I.2: Global economy registers strong growth

2022 2023 (Apr-23) 2023 (Apr-24) 2011 to 2019 average

6
4.8
5
4 3.5
Per cent

3
1.9
2
1
3.5 2.8 3.2 2.6 1.3 1.6 4.1 3.9 4.3
0
World Output Advanced Economies Emerging Market and Developing
Economies
Source: World Economic Outlook Database, April 2024 and April 2023, IMF

1.2 Both emerging market economies (EMEs) and AEs achieved higher growth in 2023 than
projected a year ago. Almost all major economies have surpassed the pre Covid-19 pandemic
(hereinafter as pandemic) real gross domestic product (GDP) levels in 2023. However, growth
has been diverse across countries, raising prospects of increasing divergences. Some economies,
including India and China, have attained GDP levels 20 per cent higher in 2023 compared to
2019 levels. Among AEs, the US witnessed continued growth momentum. However, economic
activity remains subdued in the Euro area, although the magnitude of the downturn has eased.

1.3 The stark difference in the economic performance of countries has been on account
of domestic structural issues, uneven exposure to geopolitical conflicts and the impact of
monetary policy tightening. The economic shocks resulting from the Russia-Ukraine conflict
had an outsized impact on Europe, leading to subdued growth in large countries like Germany
and France. The US also faced high inflationary pressures and consequently raised the policy
rates substantially. But, the pass-through to outstanding household mortgages was limited on
account of the high share of fixed-rate mortgages and corporate debt being termed out at fixed

5 International Monetary Fund, World Economic Outlook, April 2023, page 9 (https://tinyurl.com/2empx2dn)

3
Economic Survey 2023-24

rates6, limiting the impact of higher policy rates on economic activity7. India registered a steep
decline in economic growth during the pandemic but recovered swiftly, aided by strong private
consumption and government impetus to infrastructure investment. China, on the other hand,
had only a slight moderation in growth during the pandemic on account of swift policy actions,
including a high vaccination rate8, but growth has slowed subsequently due to structural issues.
Japan, post-pandemic, went through subdued growth but is expected to turn around in 2024,
driven by a weak yen and improved consumer spending.

Chart I.3: All major economies have surpassed pre-pandemic GDP levels

Year in which crossed

pre pandemic GDP Ratio of GDP (constant prices,
(constant prices, national currency) in 2023 to
national currency) corresponding level in 2019
Brazil 2021 107
China 2020 120
France 2022 102
Germany 2022 101
India 2021 120
Indonesia 2021 112
Italy 2022 103
Japan 2023 101
Mexico 2022 104
South Africa 2022 101
Thailand 2023 100
United Kingdom 2022 102
United States 2021 108
Source: World Economic Outlook Database, April 2024, IMF, National Accounts Statistics, Ministry of Statistics
and Programme implementation; Note: In IMF data, for India 2021 represents 2021-22 (FY22)

1.4 Apart from GDP estimates, other indicators tracking the performance of the economy
also point towards growth resilience. Leading indicators suggest an upturn in global economic
activity. The JP Morgan global composite Purchasing Managers’ Index (PMI)9 registered an
uptick since October 2023 with quicker expansion across both manufacturing and service
sectors. The JP Morgan global manufacturing PMI has been improving and stood at a 23-month
high in May 202410.

6 Termed
 out is a financial concept used to describe the transfer of short-term debt to long-term debt, allowing
companies to improve their working capital and take advantage of lower interest rates.
7 de Soyres, F., Herrero, J. G. C., Goernemann, N., Jeon, S., Lofstrom, G., & Moore, D. (2024). Why is the US GDP
recovering faster than other advanced economies?.
8 People’s Republic of China: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the
Executive Director for the People’s Republic of China, IMF (https://tinyurl.com/5456sf94)
9  J.P.Morgan Global Composite PMI (https://tinyurl.com/3ddjnymx)
10 J.P.Morgan Global Manufacturing PMI (https://tinyurl.com/2uabuyb7)

4
 State of the Economy

Chart I.4: Global PMI also corroborates strong growth momentum

Composite Manufacturing Services
56

54

52
Index

50

48

46
Jan-23
Jul-22

Jan-24
Aug-22

Oct-22
Nov-22
Dec-22

Jul-23
Aug-23

Oct-23
Nov-23
Dec-23
Apr-22
May-22
Jun-22

Apr-23
Sep-22

May-23
Jun-23

Apr-24
Feb-23
Mar-23

Sep-23

Feb-24
Mar-24

May-24

Source: S&P Global, PMI Press Releases11

1.5 The escalation of the Red Sea crisis amid heightened geopolitical tensions in the
Middle East in October 2023 led to supply chain disruptions, sending ripples to global trade
and operations. The attacks on commercial shipping in the Red Sea led to increased global
transportation costs, reflecting the rerouting of cargo. However, the increase in supply chain
pressures was transient and modest. Similar sentiments were reflected in the softening of
risk perceptions. The geopolitical risk index, which spiked after the escalation of the conflict,
declined thereafter. However, geopolitical risks are still high and persistent and may worsen in
the coming months.

Chart I.5: Easing of global supply Chart I.6: Geopolitical risk perceptions
chain pressure have softened since October 2023

Global Supply Chain Pressure Index 330 Geopolitical Risk Index

4
280
3

2 230
Index
Index

1
180
0

-1 130

-2 80
Nov-22

Nov-23
Sep-23
May-22
Jul-22
Sep-22

May-23
Jul-23

Jan-24

May-24
Jan-22

Jan-23

Mar-24
Mar-22

Mar-23

Oct-22

Oct-23
Apr-22
Jul-22

Apr-23
Jul-23

Apr-24
Jan-22

Jan-23

Jan-24

 
Source: Federal Reserve Bank of New York Source: Economic Policy Uncertainty

1.6 As the supply chain pressures eased and energy and food price shocks triggered by the
Russia - Ukraine conflict faded out, headline inflation across countries declined. After peaking

11 PMI values range between 0 and 100. Value greater than 50 implies expansion. Values below 50 implies contraction.

5
Economic Survey 2023-24

in 2022, inflationary pressures declined considerably in 2023. However, inflation is still above
the target in many countries. The easing of supply-chain pressures in tradeable goods in 2023
led to sharp decline in goods inflation in various countries, reducing logistic challenges. Core
inflation remained sticky on account of services inflation and a strong labour market, especially
in most AEs.12

Chart I.7: Declining inflationary Chart I.8: Policy rates

pressures across countries remain high

12 World AEs EMDEs Apr-21 Apr-22 Apr-23 May-24
7
10
6
8 5
Per cent

6 4

Per cent
4 3
2
2
1
0
0
2019

2020

2021

2022

2023

2024

China UK India Japan US Euro

-1
Area

Source: World Economic Outlook Database, April 2024, Source: Central Bank Policy Rates, BIS Data Portal
IMF; Note: Data for 2024 is forecast

Chart I.9: Moderation in global commodity price indices

Source: Pink Sheet, World Bank; Note: Data as accessed on 1 July 2024. 

1.7 The persistence of core inflation prompted many central banks to maintain policy rates at
a high level or further increase them in 2023, except in China, where the government focussed
on giving policy stimulus to revive the economy beset with troubles in the real estate sector.
Many central banks have hinted at the peaking of the interest rate hike cycle in recent monetary

12 B
 IS Quarterly Review, March 2024 Sectoral price dynamics in the last mile of postCovid-19 disinflation (https://
www.bis.org/publ/qtrpdf/r_qt2403.pdf)

6
 State of the Economy

policy review meetings. European Central Bank (ECB) became the first major central bank to
cut its policy rate, invoking the first rate cut in nearly five years. ECB lowered its benchmark
deposit rate by a quarter percentage point in June 2024. The Federal Open Market Committee
(FOMC) participants’ assessments also indicated rate cuts in 2024, though the projected
interest rate cut in the latest FOMC meeting (June 2024)13 is lower than that projected in
March 2023. Stronger-than-expected labour market data and persistent inflationary pressures
have been a major factor behind the Federal Reserve’s (the Fed) reluctance to lower rates. As
indicated in the FOMC Meeting statements, from early January 2024 onwards, communication
by the Fed increasingly pushed back to dispel excessive market optimism. However, market
pricing of various financial instruments indicates greater investor conviction in earlier and
deeper rate cuts. This is reflected in the inversion of the yield curve (short-term yields are
higher than long-term yields), implying investor expectation of future policy rate cuts. Financial
market participants have also eyed a much easier stance, as reflected in the significant easing
of National Financial Conditions in the US in 2023 compared to March 2022, when the Fed
began raising rates. Expansionary fiscal policy and the easing of financial conditions have, to
a degree, neutralised the monetary policy tightening of the Fed, leaving unanswered questions
on the future trajectory of inflation and the US dollar.

Chart I.10: Inversion of US yield curve Chart I.11: Financial conditions

reflecting enhanced expectation of have eased in the US
rate cut
Gap between US 10 and 2 year
National Financial Conditions
0.4 bond yield 0.1
Index
0.2
-0.1
0
-0.2
Per cent

-0.3
-0.4
-0.6 -0.5
-0.8
-1 -0.7
01-Jan-22

01-Jul-22

01-Jan-23

01-Jul-23

01-Jan-24
01-Sep-22

01-Sep-23
01-Nov-22

01-Nov-23
01-Mar-22
01-May-22

01-Mar-23
01-May-23

01-Mar-24
01-May-24

-1.2
Oct-22
Jan-23

Jan-24
Jul-22

Jul-23
Oct-23
Apr-22

Apr-23

Apr-24


Source: Federal Reserve Bank of St. Louis Source: Federal Reserve Bank of Chicago; Note14

1.8 On the fiscal front, global general government fiscal deficit (as a per cent of GDP) rose by
1.6 percentage points in 2023 compared to last year. This increase primarily stemmed from a
year-on-year (YoY) decline in revenues as windfall revenues from inflation for oil-producing

13 FOMC Projections materials, June 12, 2024 (https://tinyurl.com/2574674a)

14 The NFCI is constructed to have an average value of zero and a standard deviation of one over a sample period
extending back to 1971. Positive values of the NFCI have been historically associated with tighter-than-average
financial conditions and vice versa.

7
Economic Survey 2023-24

and commodity-exporting countries waned while expenditures remained largely stable (IMF
Fiscal Monitor, April 202415). Consequently, global public debt also inched up in 2023.

Chart I.12: Fiscal deficit edged up Chart I.13: Uptick in global debt
across countries in 2023
General Government Fiscal Deficit as a per cent of GDP in 2023
Change in Fiscal Deficit as a per cent of GDP in 2023 over 2022
10 99.4

Per cent of GDP

94.7
6 93.2
Per cent

4 91.3
2
0
84.2
-2
AEs

EMDEs

UK
World

US

China

South Africa
India
Brazil

2019 2020 2021 2022 2023

 
Source: Fiscal Policy in the Great Election Year, Fiscal Monitor, IMF, April 2024

1.9 Despite strong global economic growth, as per the WEO data, the global volume of exports
of goods and services registered a modest growth of 0.5 per cent in 2023 compared to 2022.
The slow growth was driven by lower demand in developed economies and weaker trade in East
Asia and Latin America (UNCTAD March Update 2024)16. High energy prices and inflation
weighed heavily on the demand for manufactured goods, resulting in a decline in world
merchandise trade volume for 2023. On the other hand, developments in the services trade were
more upbeat, partly offsetting the decline in goods trade (WEO, IMF Database, April 2024).
Recurring disruptions, especially since the Russia-Ukraine crisis and increased concerns about
supply-chain resilience also contributed to the slowdown. There is a reallocation of trade along
geopolitical lines, with rising cross-border trade restrictions. About 3,000 new restrictions on
trade were introduced in 2023, according to Global Trade Alert data (IMF, WEO, April 2024)17.

1.10 Concerns regarding geopolitical conflicts, high borrowing costs and global economic
fracturing were also reflected in weakening FDI flows. Global FDI flows declined in 2023
compared to 202218.

15 Fiscal Policy in the Great Election Year, Fiscal Monitor, IMF (https://tinyurl.com/bdfxk7c5)
16 Global Trade Update, March 2024, UNCTAD (https://tinyurl.com/pe87zewe)
17 World Economic Outlook, April 2024, International Monetary Fund, page 14 (https://tinyurl.com/38cuxrbw)
18 World Investment Report 2024, UNCTAD (https://tinyurl.com/2u48tsuc)

8
 State of the Economy

Chart I.14: Merchandise trade growth Chart I.15: Weakening

declines in 2023 FDI inflows
Volume of exports of goods and services
Volume of exports of goods 2022 2023
1500
15.0
1200
10.0

USD Billion
Growth (Per cent)

900
5.0
0.5 600
0.0
300
-0.4
-5.0
0
-10.0 World Developed Developing
2019 2020 2021 2022 2023 Economies Economies

Source: World Economic Outlook Database, April 2024, IMF Source: World Investment Report 2024, UNCTAD

A RESILIENT DOMESTIC ECONOMY

1.11 India’s economy carried forward the momentum it built in FY23 into FY24 despite a gamut
of global and external challenges. The focus on maintaining macroeconomic stability ensured
that these challenges had minimal impact on India’s economy. As a result, India’s real GDP grew
by 8.2 per cent in FY24, posting growth of over 7 per cent for a third consecutive year, driven by
stable consumption demand and steadily improving investment demand. On the supply side,
gross value added (GVA) at 2011-12 prices grew by 7.2 per cent in FY24, with growth remaining
broad-based. Net taxes at constant (2011-12) prices grew by 19.1 per cent in FY24, aided by
reasonably strong tax growth, both at the centre and state levels and rationalisation of subsidy
expenditure. This led to the difference between GDP and GVA growth in FY24.

Chart I.16: Carry-forward of momentum in economic growth

Nominal GDP (₹ lakh crore) Real GDP Growth (per cent) (RHS)
350 12
10
300
Nominal GDP (₹ lakh crore)

8
250 6
4
Per cent)

200
2
150 0
100 -2
-4
50
-6
0 -8
FY20 FY21 FY22 FY23 FY24
(2nd RE) (1st RE) (PE)
Source: Statement 13: Annual and Quarterly Estimates of GDP at Constant Prices, and Annual and Quarterly
Estimates of GDP at Current Prices 2011-12 Series, National Accounts Data, MoSPI; Note: RE – Revised Estimates,
PE – Provisional Estimates

9
Economic Survey 2023-24

1.12 The shares of the agriculture, industry and services sector in overall GVA at current prices
were 17.7 per cent, 27.6 per cent and 54.7 per cent respectively in FY24. GVA in the agriculture
sector continued to grow, albeit at a slower pace. Erratic weather patterns during the year
and an uneven spatial distribution of the monsoon in 2023 impacted overall output. This is
reflected in the marginal decline in total foodgrain output for FY24 of 0.3 per cent as per the
third advanced estimate of foodgrain production released by the Ministry of Agriculture and
Farmers’ Welfare (MoAFW).19

Chart I.17: Broad-based growth Chart I.18: Private consumption steady

as investment drives growth
Agriculture Industry 140 PFCE GFCF Exports
15

Per cent share in GDP (current

Services 120
Real GVA growth (per cent)

10 9.5 100
7.6 80

prices)
5
1.4
60
0
40
-5 20

-10 0

(1st RE)
(2nd RE)

FY24
FY20

FY21
FY20 FY21 FY22 FY23 FY24

(PE)
FY23
FY22
(2nd RE) (1st RE) (PE)

Source: Statement 12: Annual and Quarterly Estimates of GDP at Current Prices, 2011-12 Series, and Statement
13: Annual and Quarterly Estimates of GDP at Constant Prices, 2011-12 Series, National Accounts; Note: PFCE –
Private Final Consumption Expenditure. GFCF – Gross Fixed Capital Formation

1.13 Within the industrial sector, manufacturing GVA shrugged off a disappointing FY23 and
grew by 9.9 per cent in FY24. Manufacturing activities benefitted from reduced input prices
while catering to stable domestic demand. The input price advantage was reflected in the
subdued growth in the Wholesale Price Index (WPI) inflation, which led to a deflator of (-)1.7
per cent for the manufacturing sector during FY24. Manufacturers also passed on the reduction
in input prices to consumers, reflected in the sustained decline in the core consumer price
inflation. The strength of manufacturing is further corroborated by the strong performance of
the HSBC India PMI for manufacturing, which consistently remained well above the threshold
value of 50, indicating sustained expansion and stability in India's manufacturing sector.
Construction activities displayed increased momentum and registered a growth of 9.9 per cent
in FY24 due to the infrastructure buildout and buoyant commercial and residential real estate
demand.

1.14 Various high-frequency indicators reflect the growth in the services sector. Both Goods
and Services Tax (GST) collections and the issuance of e-way bills, reflecting wholesale and
retail trade, demonstrated double-digit growth in FY24. Financial and professional services

19 https://tinyurl.com/2eekevhu

10
 State of the Economy

have been a major driver of growth post the pandemic. Contact-intensive services—prominently
trade, transport, real estate and their ancillary services that were impacted the most during
the pandemic have emerged much stronger in the post-pandemic period, embedding greater
technology and digital content in them and transforming the nature of the service delivery
in India. The proliferation of global capability centres (GCCs) has also imparted resilience to
India's services exports, giving further thrust to the sector.

1.15 On the demand side, private consumption has been a crucial and steadfast cog in the
GDP growth. Private final consumption expenditure (PFCE) grew by 4.0 per cent in real terms
in FY24. Urban demand conditions remain strong, as reflected in various urban consumption
indicators such as domestic passenger vehicle sales20 and air passenger traffic21. It is also reported
that rural consumption growth has gradually picked up pace during the quarter ending March
2024.22 As per the Federation of Automobile Dealers Associations, two and three-wheeler and
passenger vehicle sales also registered an uptick in FY24.

Chart I.19: Vehicle sales in rural areas have recovered

smartly since the pandemic
3 Wheeler Passenger Vehicles 2 Wheeler (RHS)
16 140
14 120
12

Numbers in lakh
100
Numbers in lakh

10
80
8
60
6
40
4
2 20

- -
FY18 FY19 FY20 FY21 FY22 FY23 FY24

Source: Federation of Automobile Dealers Associations

1.16 Gross Fixed Capital Formation (GFCF) continues to emerge as an important driver
of growth, as indicated in its rising share of nominal GDP. India is in the midst of a private
capex upcycle that has been aided by government capital expenditure. As per Statement 1.11
of the National Accounts Statistics 2024 released by the Ministry of Statistics and Programme
Implementation (MoSPI), GFCF by private non-financial corporations increased by 19.8 per
cent in FY23. There are early signs that the momentum in private capital formation has been
sustained in FY24. As per data provided by Axis Bank Research, private investment across a
consistent set of over 3,200 listed and unlisted non-financial firms has grown by 19.8 per cent
in FY24.

20 https://tinyurl.com/y2xhx5bb
21 https://tinyurl.com/4x9udsdz
22 https://tinyurl.com/yjkpdsau

11
Economic Survey 2023-24

Chart I.20: Greater general Chart I.21: Steadily rising

government focus on building private corporate capex
productive capacities
Union Government State Governments 10
12
9

10 8
7
Capex (₹ lakh crore)

8 6

₹ lakh crore
5
6
4
4 3
2
2
1
0 -
FY20 FY21 FY22 FY23 FY24 FY19 FY20 FY21 FY22 FY23 FY24
Source: Tables no. 95 and 102, Handbook of Statistics Source: Axis Bank Research
on the Indian Economy, RBI, CGA23

1.17 Apart from private corporations, households have also been at the forefront of the capital
formation process. The growth in housing sales in cities has been particularly impressive,
indicating that urban households are diversifying the deployment of their savings. In 2023,
residential real estate sales in India were at their highest since 2013, witnessing a 33 per cent
YoY growth, with a total sale of 4.1 lakh units in the top eight cities. As per real estate research
firm Proptiger, new supply witnessed an all-time high, with 5.2 lakh units launched in 2023,
as against 4.3 lakh units in 2022. The momentum continued in Q1 of 2024, witnessing record-
breaking sales of 1.2 lakh units, clocking a robust 41 per cent YoY growth. New supply has
consistently exceeded one lakh units since Q2 of 2022, underscoring persistent demand-supply
dynamics in the housing market.

1.18 With cleaner balance sheets and adequate capital buffers, the banking and financial
sector is well-positioned to cater to the growing financing needs of investment demand. Credit
disbursal by scheduled commercial banks (SCBs) to industrial micro, small and medium
enterprises (MSMEs) and services continues to grow in double digits despite a higher base.
Similarly, personal loans for housing have surged, corresponding to the increase in housing
demand. However, credit offtake by large industries seems to be growing at a lower albeit stable
pace. These larger industries seem to be tapping the corporate bond market. Corporate bond
issuances in FY24 were up by 70.5 per cent, with private placement remaining the preferred
channel for corporates. Outstanding corporate bonds were up by 9.6 per cent (YoY) as of the
end of March 2024.

23 FY24 figures for the Union Government are Provisional Actuals released by CGA; FY24 figures for State
Governments are Budget Estimates and FY23 values are Revised Estimates.

12
 State of the Economy

Chart I.22: Increased household Chart I.23: Record housing sales

savings in the form of physical assets in top 8 cities 24
Saving in physical assets
40 20 160
Savings in physical assets as per
35 140
cent of GDP (RHS)

Housing sales (thousands)

30 15 120

25 100
₹ lakh crore

Per cent
20 10 80

15 60

10 5 40
5 20
0 0 0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23

FY20 FY21 FY22 FY23 FY24

Source: Statement 1.9, National Accounts Statistics Source: Various Proptiger Reports25
2024, MoSPI

Chart I.24: SCBs catering to Chart I.25: Large corporates tapping

investment demand corporate bond markets

YoY growth in bank credit to New Issuances (RHS)

40 different sectors as of April '24 50 7
Outstanding Corporate Bonds
35
45 6
30
5
25 40
₹ lakh crore

₹ lakh crore
Per cent

20 4
35
15 3
10 30
2
5
25 1
0
20 0
Services
Non-Food

Housing
Industry
MSME
Credit

Mar-22

Mar-23

Mar-24
Jun-21
Sep-21
Dec-21

Dec-22

Dec-23
Jun-22
Sep-22

Jun-23
Sep-23

Source: Table 170, Sectoral Deployment of Bank Credit, Source: Outstanding Corporate bonds, SEBI
Handbook of Statistics on Indian Economy, RBI

1.19 Global trade growth slowed in 2023, leading to a marginal decline in merchandise exports
growth. As merchandise imports slowed more than exports and services trade recorded a
larger surplus compared to the year before, the drag exerted by net exports on GDP reduced.
The subdued contribution of exports was more than counterbalanced by the pick-up in fixed
investment, thereby continuing the trend of domestic stimulus seamlessly replacing external
stimuli.
24 T
 he eight major cities referred to in the Proptiger reports are Ahmedabad, Bengaluru, Chennai, Delhi NCR,
Hyderabad, Kolkata, Pune, and Mumbai MMR.
25 https://www.proptiger.com/guide/news-views

13
Economic Survey 2023-24

1.20 FY24 also marked the year GDP reached levels projected by the pre-pandemic trajectory.
A trend analysis in Box I.1 details how the overall economy and most supply and demand-side
sectors have grown at a pace to erase any permanent losses in output and demand.

Box I.1: Growth in GDP, GVA, and their components ensure

no permanent losses in demand and output

A permanent output loss refers to a downward level shift in the observed variable due to the
loss in output capacity. This box item visualises the pre-pandemic and post-pandemic trends
in India's aggregate macroeconomic variables such as GDP, GVA, private consumption and
the subcomponents of GVA.

Chart I.26: A recovery to pre- Chart I.27: Gap from trend reducing
pandemic trajectory in GDP steadily

50 Deseasonalised GDP GDP Gap from Trend FY22 Gap (%, RHS)
FY23 Gap (%, RHS) FY24 Gap (%, RHS)
45 pre-pandemic trend
4.5 8%
40 4.0 7%
3.5 6%
₹ lakh crore

35
₹ lakh crore

3.0 5%
30 2.5
4%
2.0
25 3%
1.5
1.0 2%
20
0.5 1%
15 0.0 0%
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24

Dec-21

Dec-22

Dec-23
Jun-21
Sep-21

Jun-22
Sep-22

Jun-23
Sep-23
Mar-22

Mar-23

Chart I.28: No permanent losses Mar-24

Chart I.29: No permanent
in output capacity consumption losses
45 Deseasonalised PFCE
Deseasonalised GVA 26
40 pre-pandemic trend 24 pre-pandemic trend

35
22
₹ lakh crore

20
30
₹ lakh crore

18

25 16
14
20 12
15 10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24

14
 State of the Economy

Chart I.30: Investment has taken off Chart I.31: Industrial GVA growing
faster than pre-pandemic trajectory
16 Deseasonalised GFCF 14
Deseasonalised Industry GVA
14 pre-pandemic trend
12 pre-pandemic trend

12

₹ lakh crore
10
₹ lakh crore

10
8
8

6 6

4 4
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24

Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
Chart I.32: Services GVA lagging
29
Deseasonalised Services GVA pre-pandemic trend

23
₹ lakh crore

17

11

5
Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23

Mar-24
Source: Chart I:25 to Chart I.31 are using calculations based on Statement 13: Annual and Quarterly Estimates
of GDP at Constant Prices, 2011-12 Series, National Accounts Data, MoSPI

In the analysis, six key macroeconomic variables at constant (2011-12) prices, i.e., GDP,
GVA, PFCE, GFCF, industry GVA, and services GVA of quarterly frequency, have been
deseasonalised using the X-12 ARIMA technique that decomposes variables into its trend,
seasonal, cyclical, and idiosyncratic components. The deseasonalised variables have been
visualised to understand where these variables stand vis-à-vis their pre-pandemic trend
projections. A trend line based on de-seasonalised data between June 2011 and March
2020 has been plotted and extended until March 2024. This trend reflects the approximate
projection of the variable in each quarter from June 2020 to March 2024 had the pandemic-
induced contraction of economic activity not occurred.

15
Economic Survey 2023-24

The visualisation reveals that GDP, GVA, private consumption, GFCF, and industrial GVA
have recovered quickly. We see that the compounded quarterly growth rate (CQGR) of these
variables is greater in the period Q3 FY21 – Q4 FY24 than the CQGR in the pre-pandemic
period of Q1 FY12 – Q4 FY20 (Table I.). This enabled a broad catch-up to the levels projected
by the pre-pandemic trends, thereby averting any permanent losses in demand/output. The
reasons for this are manifold. The pandemic-induced contraction presented an opportunity
for the deployment of a counter-cyclical fiscal policy that focussed on capital expenditure,
thereby positioning government-driven capital formation as a driver of growth. It also
enabled the implementation of multiple process reforms and the deployment of public digital
infrastructure that boosted the ease of doing business. The pandemic also accelerated the
adoption of digital technologies amongst the population and enhanced financial inclusion.
With the GST and the Insolvency and Bankruptcy Code (IBC) acting as tailwinds to the
economy, growth took off.

Table I.1: Faster growth since the pandemic-induced contraction

Compounded growth in GDP GVA PFCE Industrial Services GFCF
deseasonalised quarterly GVA GVA
series (in %)
Between Q1FY12 - Q4FY20 1.5 1.5 1.4 1.1 1.9 1.3
Between Q3FY21 - Q4FY24 1.9 1.8 1.7 1.4 2.1 2.0

GVA of the services sector is yet to reach the level projected by the pre-pandemic trend. The
granular data available until FY23 reveals that this is on account of the trade, hotel, road and
air transport sectors. These sectors, taken together, contributed about 28.5 per cent to total
real GVA in FY23 and were only one per cent above their levels in FY20.

Chart I.27 reveals that the gap between GDP and its pre-pandemic trend has been closing,
and GDP was only around 1 per cent below this trend on an annual average basis in FY24.
There is still some catching up left. The extant momentum in growth not only allows the
economy to catch up with its pre-pandemic trend without stoking inflationary pressures but
aids in surpassing it.

MACROECONOMIC STABILITY SAFEGUARDS GROWTH

1.21 For India, FY23 began with multiple challenges. Spillovers from the conflict in Europe
were stoking domestic price pressures and widening the current account deficit (CAD) through
increased oil prices. Central banks in several countries began raising policy rates to battle
inflationary pressures, leading to significant uncertainty in AEs and EMEs alike. However,
throughout FY23 and FY24, the focus on macroeconomic stability was vital in securing
economic growth amidst domestic and external vulnerabilities.

16
 State of the Economy

Improving Public Finances

Consolidation of Union Government Finances

1.22 Against the global trend of widening fiscal deficit and increasing debt burden, India has
remained on the course of fiscal consolidation. The favourable fiscal performance in 2023,
emerged as the cornerstone of India’s macroeconomic stability. The fiscal deficit of the Union
Government has been brought down from 6.4 per cent of GDP in FY23 to 5.6 per cent of GDP
in FY24, according to provisional actuals (PA) data released by the Office of Controller General
of Accounts (CGA). Strong growth in direct and indirect taxes on account of resilient economic
activity and increased compliance meant that the tax revenues generated exceeded the
conservative budgetary estimates. Additionally, higher-than-budgeted non-tax revenue in the
form of dividends from the RBI has buffeted revenue receipts. In combination with restrained
revenue expenditure, these buoyant revenues ensured lower deficits. A decomposition of the
fiscal deficit over the past few years reveals that with a narrowing revenue deficit, a larger share
of the fiscal deficit is being accounted for by capital outlay. This suggests that the productivity
of borrowed resources has improved.

Chart I.33: Steadily declining Chart I.34: Decomposition of fiscal

deficit ratios deficit shows increasing investment
orientation

9.2 Primary Deficit Miscellaneous Capital Receipts

Revenue Deficit 150 Net lending
Fiscal Deficit Capital Outlay
7.3 Revenue Deficit
Per cent of fiscal deficit

100
43.0
Per cent of GDP

5.6 33.3 17.4 33.8 35.9

47.6
5.7 50
70.0 71.4 79.7
65.1 61.6
46.3
2.6
0

2.0
-50
FY19 FY20 FY21 FY22 FY23 FY24
FY21 FY22 FY23 FY24 (PA) (PA)

Source: Budget At A Glance, Union Budget FY24 Source: Various Union Budget Documents, Union
(Interim), Union Government Accounts at a Glance – Government Accounts at a Glance – O/o CGA
O/o CGA

Buoyancy in revenues continues in FY24

1.23 Significant fiscal consolidation post-pandemic could be achieved largely due to buoyant
revenues. Revenue receipts of the union government consisting of tax revenue (net to centre)
and non-tax revenue (NTR) increased YoY by 14.5 per cent in FY24 (PA), with robust growth in
both tax and non-tax revenues.

17
Economic Survey 2023-24

Chart I.35: Consistent increase in Chart I.36: Increase in gross tax

revenue receipts driven by revenue to GDP ratio driven by
both tax and non-tax revenue strong direct tax growth
Gross Tax Revenue Direct Taxes Indirect Taxes
Non Tax Revenue
Tax Revenue (net to centre)
Revenue Receipts 11.5 11.3 11.7
30 10.2
10.0
25

Per cent of GDP

₹ Lakh crore

20
6.2 6.5
6.0
15 5.2
4.8
10 5.4 5.5 5.1 5.2
4.7
5
0
FY20 FY21 FY22 FY23 FY24
(PA) FY20 FY21 FY22 FY23 FY24 (PA)

Source: Budget at a Glance, Union Budget, FY22, FY23, FY24 Interim Budget, Union Government Accounts at a
Glance – O/o CGA

1.24 The growth in gross tax revenue (GTR) was estimated to be 13.4 per cent in FY24,
translating into tax revenue buoyancy of 1.4. The growth was led by a 15.8 per cent growth in
direct taxes and a 10.6 per cent increase in indirect taxes over FY23. Broadly, 55 per cent of
GTR accrued from direct taxes and the remaining 45 per cent from indirect taxes. The increased
contribution of direct taxes to GTR over the years has been in line with the government’s effort
to enhance progressivity in taxation. The efficiency of tax collection has increased over time,
reflected in the cost of collection of direct taxes declining from 0.66 per cent of gross collections
in FY20 to 0.51 per cent in FY2326.

 Chart I.37: Tax revenues register steady increase

FY20 FY23 FY24 (PA)

12.0

10.0
₹ Lakh crore

8.0

6.0

4.0

2.0

0.0
Corporation Tax Taxes on income other Customs and Union GST
than corporation tax Excise Duties

Source: Budget at a Glance, Union Budget, FY22, FY23, FY24 Interim Budget, Union Government Accounts at a
Glance – O/o CGA

26 I ncome Tax Department, Consolidated Time Series Data, Financial Year 2000-01 to 2022-23, Central Board of
Direct Taxes (https://tinyurl.com/3chx8v83)

18
 State of the Economy

1.25 The increase in indirect taxes in FY24 was mainly driven by a 12.7 per cent growth in GST
collection. GST E-way bill generated has also registered an uptick post-pandemic. The increase
has been equally pronounced for both intra-state trade and inter-state trade. The increase in
GST collection and E-way bill generation reflects increased compliance over time.

Chart I.38: Robust E-way bill generation corroborates strong

 economic growth momentum
Intra State Inter state
800
700
600
Millions

500
400
300
200
FY19

FY20

FY21

FY22

FY23

FY24

Source: GST Statistics (https://www.gst.gov.in/download/gststatistics)

1.26 Over the last seven years, GST has matured significantly through streamlining of
procedures and, in the process, enhancing tax buoyancy for the Union and State governments.
There have been calls for further rationalisation of rate structure to compress the number of
rates, elimination of rate inversions, introduction of broad-band rates for similar products and
expanding the tax base. Demands also relate to differentiating between serious and less serious
offences, spreading awareness among taxpayers regarding common mistakes, encouraging
voluntary compliance and expediting the resolution of disputes.27

1.27 Within non-debt capital receipts, the proceeds from the National Monetisation Pipeline
(NMP), which was announced in the Union Budget FY22, are gaining traction. The NMP listed
core assets of union government ministries and public sector enterprises with a potential of
₹6 lakh crore for monetisation over the four-year period of FY22 – FY25. During FY22 - FY24,
receipts worth ₹3.9 lakh crore have been recorded as against a target of ₹4.3 lakh crore.28 The
Ministry of Road Transport and Highways and the Ministry of Coal contributed ₹97 thousand
crore out of proceeds worth ₹1.6 lakh crore in FY24. The National Highways Authority of India
has identified and published an indicative list of 33 assets to be monetised in FY25. This will
help improve capital allocation by investors while aiding the government in its pursuit of fiscal
consolidation.

Trends in Central Government Expenditure

1.28 The government has followed a path of fiscal consolidation while continuing to protect
the vulnerable sections and investing in the productive capacity of the economy. Successive

27 https://tinyurl.com/2bam4ht8
28 https://tinyurl.com/d3cfceu3

19
Economic Survey 2023-24

budgets moderated the growth in revenue expenditure. While achieving the compression in
revenue expenditure as a per cent of GDP, the government also ensured that free food grains
are provided to 81.4 crore people in the country. At the same time, shares of total expenditure
allotted to capital spending were progressively enhanced, thereby improving the quality
of expenditure. Government expenditure in FY24 continued this trend whereby, as per the
provisional actuals, total expenditure declined to 15.0 per cent of GDP from 17.7 per cent in FY21.

Chart I.39: Prudent management of Chart I.40: Increasing union government

expenditure effective capex29 to GDP ratio
Effective Capex
FY20 FY21 FY22 FY23 FY24 (PA)
18 Effective Capex as % of GDP (RHS)
15.5 14 5
15 12
4
11.8
Per cent of GDP

12 10

₹ lakh crore
8 3

Per cent
9
6 12.5
2
6 10.5
3.6 3.2 4 8.4
2.1 6.6
3 1.4 5.0 5.2 1
2 4.5

0 0 0
Revenue Major Capital
FY18

FY19

FY20

FY21

FY22

FY23

FY24
(PA)
Expenditure Subsidies Expenditure

Source: Budget at a Glance, Various Union Budgets, Union Government Accounts at a Glance – O/o CGA

Chart I.41: Prioritising productive Chart I.42: Improving quality of

expenditure expenditure

45 Revenue Expenditure 0.27

Capital Expenditure
40 Total Expenditure
0.21
Ratio of Capex to Revex

35
0.19
Growth (per cent)

30
0.15
25 0.14 0.14
20
15
10
5
0
FY19

FY20

FY21

FY22

FY23

FY24
FY19

FY20

FY21

FY22

FY23

FY24

(PA)
(PA)

Source: Budget at a Glance, Various Union Budget Documents, Union Government Accounts at a Glance – O/o
CGA. Notes: Revex - Revenue Expenditure

29 Effective Capex includes capex and Grants-in-Aid for creation of capital assets.

20
 State of the Economy

Capex has lifted the productive potential of the economy; time for the private
sector to take the baton

1.29 The PA show that capital expenditure for FY24 stood at ₹9.5 lakh crore, an increase of
28.2 per cent on a YoY basis, and was 2.8 times the level of FY20. The Government’s thrust on
capex has been a critical driver of economic growth amidst an uncertain and challenging global
environment.

1.30 The focus of capex has been broad-based. Spending in sectors such as road transport
and highways, railways, defence services, and telecommunications delivers higher and longer
impetuses to growth by addressing logistical bottlenecks and expanding productive capacities.
Government capex has also begun to crowd in private investment, as discussed earlier in this
chapter. Additionally, the Government continues to disburse grants-in-aid for the creation of
capital assets to the states, thereby incentivising them to increase their productive spending.

1.31 At this juncture, it is important to note that while it remains the government’s responsibility
to facilitate the development of infrastructure and address logistical challenges, it is incumbent
upon the private sector to take forward the momentum in capital formation on its own and in
partnership with the Government. Between FY19 and FY23, the share of private non-financial
corporations in overall GFCF increased only by 0.8 percentage points from 34.1 per cent to
34.9 per cent. This was mostly driven by their fast-increasing share in the additional stock of
dwellings, other buildings and structures. Their share in addition to the capital stock in terms
of machinery and equipment, started growing robustly only since FY22, a trend that needs to
be sustained on the strength of their improving bottom-line and balance sheets in order to
generate high-quality jobs.

Table I.2: Broad-based deployment of Union Government capex

(Values in ₹ thousand crore)
Sector FY23 FY24 (PA) Growth
Road Transport and Highways 206.0 263.9 28.1%
Railways 159.3 242.6 52.3%
Defence Services (capital outlay) 142.9 154.3 7.9%
Transfer to States 92.7 122.9 32.5%
Telecommunications 54.7 59.4 8.5%
Housing and Urban Affairs 26.9 26.4 -1.6%
Atomic Energy 13.8 14.5 5.1%
Defence (Civil) 8.0 10.3 29.5%
Police 8.2 9.7 18.7%
Space 4.3 4.4 3.4%
Source: Statement 3 of Expenditure Profile, Union Budget 2024-25 (Interim), Union Government Accounts at a
Glance – O/o CGA

21
Economic Survey 2023-24

Revenue expenditure growth remains restrained

1.32 The PA show that total expenditure for FY24 is lower by ₹60.6 thousand crore as
compared to the budgeted estimates. However, these lower-than-budgeted estimates have not
resulted in compromises on important areas of revenue spending, such as rural development
and education, where allocation is significantly higher than budgeted estimates. Efficient
expenditure management, aided by lower borrowing costs, has led to a marginal downward
revision of budgeted expenditure on interest payments in FY24.

1.33 However, even though expenditure on interest payments is lower than budgeted, it
constitutes 30.4 per cent of the revenue expenditure in FY24 (PA). A commitment to fiscal
consolidation in the medium term, combined with revenues from asset monetisation and
privatisation, will be essential in reducing the share of interest payments in revenue expenditure
in order to generate more fiscal headroom.

1.34 Expenditure on major subsidies declined by 22.1 per cent on a YoY basis, led by a decrease
in fertiliser30 and food subsidies by 24.6 per cent and 22.4 per cent, respectively, in FY24. The
prices of fertilisers had steeply increased in FY23 due to the Russia-Ukraine conflict, prompting
a higher outlay for its subsidy. However, in FY24, the supply chains adapted, and as a result, the
prices of fertilisers have broadly returned to pre-conflict levels. This facilitated a lower outlay
on fertiliser subsidies. The additional food subsidy, instituted to protect vulnerable sections of
the population, has been gradually consolidating as well.

Overview of State Government Finances

1.35 State governments continued to improve their finances in FY24. Preliminary unaudited
estimates of finances for a set of 23 states31, published by the Comptroller and Auditor General
of India, suggest that the gross fiscal deficit of these 23 states was 8.6 per cent lower than the
budgeted figure of ₹9.1 lakh crore.32 This implies that fiscal deficit as a per cent of GDP for these
states came in at 2.8 per cent as against a budgeted 3.1 per cent. The quality of spending by state
governments improved, too, with state governments focusing on capex as well.

30 Fertiliser subsidy includes nutrient-based fertiliser subsidy and urea subsidy

31 The 23 major states are: Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Gujarat, Haryana,
Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Punjab,
Rajasthan, Tamil Nadu, Telangana, Tripura, Uttar Pradesh, Uttarakhand, and West Bengal.
32 Budgeted figures available from e-STATES Database published by RBI in their report on State Finances – A
Study of State Budgets, December 2023 (https://tinyurl.com/ywv3wvdr)

22
 State of the Economy

Chart I.43: State Gross Fiscal Deficit Chart I.44: Improving quality of
under the 3 per cent of GDP mark states’ expenditure
3.9
2.6
Gross fiscal deficit of 23 states as

Capex of 23 states as per cent of

2.8
2.7 2.6
2.5
per cent of GDP

2.4
2.3

GDP
2.2
2.2
FY20

FY21

FY22

FY23

FY24

FY20 FY21 FY22 FY23 FY24

Source: State Accounts Report, CAG; Note – data for FY24 are preliminary actuals

Chart I.45: States’ debt burden is gradually easing

30.2
Outstanding liabilities of 23 states

28.4
per cent of GDP

27.5
27.1

25.8

FY20 FY21 FY22 FY23 FY24

Source: Statement 19: Total Outstanding Liabilities of State Governments, State Finances: A Study of Budgets, RBI

1.36 Charts I.46 through I.49 encapsulate states’ finances33. The Union Government’s transfers
to the states are highly progressive, with states with lower Gross State Domestic Product (GSDP)
per capita receiving higher transfers relative to their GSDP. On the revenue side, however,
the richer states, with certain exceptions, are able to mobilise a greater proportion of their
GSDP as taxes. The combined result of these dynamics on the receipts side is that poorer states
are enabled to incur greater public spending relative to their GSDP with the system of fiscal

33 C
 harts I.46 to I.49 are based on the averages of the respective variables for FY22 and FY23. The graphs have
been plotted for a total of 17 states, i.e., Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Jharkhand,
Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar
Pradesh, and West Bengal. GSDP and PC GSDP of Maharashtra for FY23 have been taken from the Economic
Survey of Maharashtra 2024

23
Economic Survey 2023-24

devolution that India has. Given the importance of public expenditure in stimulating growth
and development, this is sine qua non for addressing regional imbalances in the country.

Chart I.46: Progressive nature of Chart I.47: States’ tax efforts

transfers to states
y = -4.2917x + 15.513 8.5
20

Average Own tax revenue as % of

18
Average Transfers as % of GSDP

8
y = 0.1589x + 6.0449
16
7.5
14
12 7

GSDP
10
6.5
8
6 6

4 5.5
2
0 5
0 1 2 3 4
0 1 2 3 4
Average per capita GSDP
Average per capita GSDP
Chart I.48: Total Expenditure of States Chart I.49: Fiscal Deficit of States
35 6
Average fiscal deficit as % of GSDP

30 5 y = 0.081x + 2.6209
Average total expenditure as % of

25 y = -4.6032x + 26.869
4
20
3
GSDP

15
2
10

5 1

0 0
0 1 2 3 4 0 1 2 3 4
Average per capita GSDP Average per capita GSDP

Source: State Accounts Report, CAG

General Government Debt

1.37 In the years since the pandemic, the Union Government and the State Governments in
general have focussed on fiscal consolidation, which was reflected in the declining debt trajectory
of the government till FY23. The general government debt to GDP ratio increased slightly in
FY24 despite a declining primary deficit because monetary tightening led to a spike in interest
rates, while the decline in inflationary pressures resulted in a lower-than-budgeted nominal
GDP growth. However, with the increased prospects of monetary policy easing, along with an
uptick in WPI inflation and the government’s continued commitment to fiscal consolidation,
the debt ratio is likely to resume its declining trend.

24
 State of the Economy

Chart I.50: General Government liabilities to GDP ratio come

 off their peak in FY21
Combined liabilities Domestic liabilities

90.0

85.0
Per cent of GDP

80.0

75.0

70.0

65.0
FY19 FY20 FY21 FY22 FY23 FY24

Source: Table 112, Combined Liabilities of Central and State Governments, Handbook of Statistics on Indian
Economy, RBI. Notes34

Chart I.51: Primary deficit declines, and, growth-interest

rate differential remains positive
Primary Deficit (per cent of GDP) Gap (Nominal GDP growth and cost of borrowing)

11

6
Per cent

1
FY20 FY21 FY22 FY23 FY24
-4

-9
Source: Primary Deficit - Database on Indian Economy, RBI; Nominal GDP growth - Provisional Estimates for
FY24, National Accounts Statistics, MoSPI; Cost of borrowing35 - RBI Database on Indian Economy, Budget at a
Glance.

1.38 Union Government debt is characterised by low currency and interest rate risks. This is
owing to the low share of external debt in the debt portfolio and almost all external borrowings
being from official sources. The gradual elongation of the maturity profile of the Union
Government’s debt is leading to reduced rollover risks. The proportion of dated securities

34 D ata for combined liabilities for FY23 are Revised Estimates, and data for FY24 are Budget Estimates. Data for
GDP is RE for FY21, FY22, FY23 and PE for FY24.
35 The cost of borrowing is calculated as the total interest payments as a per cent of the average debt of period (t)
and (t-1).

25
Economic Survey 2023-24

maturing in less than five years has seen a consistent decline in recent years. The weighted
average maturity of the outstanding stock of dated securities of the Government has increased
from 9.6 years in end-March 2011 to 12.5 years in end-March 2024.36

1.39 The sustained improvement in fiscal metrics is beginning to have an impact on India’s
credit ratings. For the first time in 13 years, S&P Global Ratings upgraded India's sovereign
credit rating outlook from ‘stable’ to ‘positive’ in May 2024 on the back of robust economic
growth, sound economic fundamentals and improved composition of government spending.
S&P mentioned that cautious monetary and fiscal policy that diminishes general government
debt and interest burden while improving economic resilience could lead to a higher rating over
the next two years. The agency further indicated that such an update would require continued
commitment to fiscal consolidation in a manner that reduces general government deficits to
below 7 per cent on a structural basis. If that were to happen, India’s 10-year benchmark bond
yield will drop between 30 and 50 basis points. The drop in the benchmark borrowing cost
will cause interest rates to decline in general, leading to overall lower cost of borrowing for
households and businesses. That would be a fiscal stimulus in itself.

Moderation in inflation pressure

1.40 Despite global supply chain disruptions and adverse weather conditions, domestic
inflationary pressures moderated in FY24. After averaging 6.7 per cent in FY23, retail inflation
declined to 5.4 per cent in FY24. This has been due to the combination of measures undertaken
by the Government and the RBI. The Union Government undertook prompt measures such as
open market sales, retailing in specified outlets, timely imports, reduced the prices of Liquified
Petroleum Gas (LPG) cylinders and implemented a cut in petrol and diesel prices. The RBI
raised policy rates by a cumulative 250 bps between May 2022 and February 2023. It also
managed liquidity levels efficiently and maintained consistent and coherent communication
with market participants. Even as higher policy rates are transmitted through the system, the
RBI continues to support growth with adequate liquidity, thereby ensuring that inflation is
headed to the target of 4 per cent on a durable basis. The effects of these measures are reflected
in the latest data on CPI inflation – headline CPI inflation of 5.1 per cent in June 2024, and core
inflation declined to 3.1 per cent. Consequently, India was the only country amongst its peers
to traverse a high-growth and low-inflation path in the period FY22 – FY24 (Chart I.53). This is
despite the fact that there were pressures on the food inflation front, driven by adverse weather
conditions.

36 Table 4.2 of PDMC quarterly report (January – March 2024) (https://tinyurl.com/mrxaf4kw)

26
 State of the Economy

Chart I.52: Declining core inflation Chart I.53: India a high-growth

but volatile food inflation and low-inflation economy
14.0 Headline Inflation
9
Core Inflation
12.0 Food Inflation India

(Avg. Growth - FY22 - FY24,%)

8

10.0 7
6
8.0
Per cent

UK Mexico EMDEs
5
6.0 4
US Brazil
4.0 3 Russia
AEs
2
2.0 Germany
1
0.0
0
Aug-22

Aug-23
Apr-22

Oct-22

Apr-23
Jun-22

Oct-23

Apr-24
Jun-23

Jun-24
Dec-22
Feb-23

Dec-23
Feb-24

4 6 8 10
(Avg. Inflation - FY22 - FY24,%)

Source: Consumer Price Indices released by CSO, Source: IMF WEO database (April 2024), MoSPI
MoSPI

The financial system remains resilient

1.41 The RBI’s vigil over the banking and financial system and its prompt regulatory actions
ensure that the system can withstand any macroeconomic or systemic shock. Data from the
RBI’s Financial Stability Report of June 2024 show that the asset quality of SCBs has improved,
with the Gross Non-Performing Assets (GNPA) ratio declining to 2.8 per cent in March 2024, a
12-year low. The system-wide capital to risk-weighted assets ratio (CRAR) declined marginally
by 37 basis points (bps) over FY24 due to an RBI-mandated revision of risk weights but
remained well above the regulatory threshold. The profitability of SCBs remained steady, with
the return on equity and return on assets ratios at 13.8 per cent and 1.3 per cent, respectively, as
of March 2024. Macro stress tests also reveal that SCBs would be able to comply with minimum
capital requirements even under severe stress scenarios.

1.42 The RBI remains proactive in undertaking regulatory action. In a measure to regulate the
exuberant growth in the unsecured lending category and preserve financial stability, the RBI
tightened norms around this portfolio. Growth in unsecured loans was outpacing that in overall
credit. To tackle this problem, the RBI directed that consumer credit exposure for banks and
Non-Banking Financial Companies (NBFCs) will attract a risk weight of 125 per cent compared
to 100 per cent earlier. The risk weight for credit card loans by banks and NBFCs was fixed
at 150 per cent and 125 per cent, respectively, up from 125 per cent and 100 per cent earlier.
Prompt regulatory actions shield the banking and financial system from adverse developments
and instil confidence in market participants. The soundness of the banking system will facilitate
the financing of productive opportunities and lengthen the financial cycle, both of which are
necessary to sustain economic growth.

India’s external sector is safely navigating through uncertainties

1.43 On the external front, moderation in merchandise exports continued during FY24, mainly

27
Economic Survey 2023-24

on account of weaker global demand and persistent geopolitical tensions. However, a sharper
decline in India’s merchandise import growth, owing to declining commodity prices, resulted in
a lower trade deficit in FY24. However, India's service exports have remained robust, reaching
a new high of USD 341.1 billion in FY24. Exports (merchandise and services) in FY24 grew by
0.15 per cent, while the total imports declined by 4.9 per cent despite a strong domestic market
demand.37 Net private transfers, mostly comprising remittances from abroad, grew to USD
106.6 billion in FY24. As a result, the CAD stood at 0.7 per cent of the GDP during the year, an
improvement from the deficit of 2.0 per cent of GDP in FY23.

1.44 Supported by optimism surrounding India’s growth story, progressive policy reform,
economic stability, fiscal prudence and attractive investment avenues, India witnessed robust
FPI inflows in FY24 that helped fund the CAD and aided the RBI in building adequate forex
reserves. Net FPI inflows stood at USD 44.1 billion during FY24 against net outflows in the
preceding two years. Net FDI inflows, however, witnessed moderation largely as a part of the
global phenomenon of declining FDI flows on account of increased scepticism. Net FDI inflows
to India declined from USD 42.0 billion during FY23 to USD 26.5 billion in FY24. However,
gross FDI inflows moderated by only 0.6 per cent in FY24. The contraction in net inflows was
primarily due to a surge in repatriation/disinvestment.

Chart I.54: CAD narrowed to 0.7 per Chart I.55: FPI inflows aided in
cent of GDP in FY24 funding CAD and building forex
reserves
Goods Services 50
120
Transfers Income
Current Account 40
80
30
40
USD Billion

USD Billion

20
0
10
-40
0
-80
-10
-120
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -20
FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY23 FY24

Source: Table 196, Handbook of Statistics on the Indian Source: Table 130, Handbook of Statistics on the Indian
Economy, RBI Economy, RBI

1.45 Overall, India’s external sector is being deftly managed with comfortable foreign exchange
reserves and a stable exchange rate. Forex reserves as of the end of March 2024 were sufficient
to cover 11 months of projected imports and more than 100 per cent of total external debt. The
Indian Rupee has also been one of the least volatile currencies among its emerging market peers
in FY24. India’s external debt vulnerability indicators also continued to be benign. External
debt as a ratio to GDP stood at a low level of 18.7 per cent as of end-March 2024. The ratio of
foreign exchange reserves to total debt stood at 97.4 per cent as of March 2024.
37 Table 132, Handbook of Statistics on the Indian Economy, RBI - https://tinyurl.com/yne8sbw7

28
 State of the Economy

Chart I.56: The ₹ was one of the most Chart I.57: Forex reserves sufficient to
stable currencies over Apr’23 – Jun’24 cover around 11 months of imports
660
British Pound -1.4
640
Mexican Peso 1.3
620
Indian Rupee 1.9

USD Billion
600
Euro 2.6
580
Chinese Renmimbi 5.0
560
Brazilian Real 10.1
540
Indonesian Rupiah 11.3
520
Japanese Yen 18.1
500

Nov-22

Nov-23
Jul-22

Jul-23
May-22

May-23

May-24
Sep-22

Sep-23
Jan-22
Mar-22

Jan-23
Mar-23

Jan-24
Mar-24
Depreciation (-)/Appreciation (+) (per
cent)

Source: Bilateral Exchange Rates, Bank for International Source: Table 205, Handbook of Statistics on the Indian
Settlements Economy, RBI

Reduction in macro vulnerability

1.46 In its pursuit of fiscal consolidation through efficient and prudent fiscal management,
the Government continues to stick to the fiscal glide path. The fiscal deficit of the Government
is expected to drop to 4.5 per cent of GDP or lower by FY26. This commitment has helped
keep the sovereign debt sustainable, thereby keeping sovereign bond yields and spreads in
check. All these factors have combined to keep the macroeconomic environment stable and
provide a platform for sustainable growth. This is reflected in the downward trajectory of the
macroeconomic vulnerability index – an index constructed by combining India’s fiscal deficit,
CAD and inflation.

Chart I.58: A reduction in macro-vulnerability despite

increased external uncertainty
CPI-Inflation (%) Macro-Vulnerability Index
24.8
21.9
18.4
20.0

12.3 11.3 14.9

10.05
9.1
6.16 5.36
3.59

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24*
Heightened Macro-vulnerability Macro-stability Pandemic & Global
Disturbance

Source: Calculated using data on CPI inflation published by MoSPI, current account deficit published by RBI, and
fiscal deficit published in the Union Budget documents. Notes38

38 R
 etail Inflation from FY09 to FY12 is based on CPI-Industrial Workers released by the Labour Bureau, FY13 to
FY24 is based on CPI-Combined released by MoSPI; Gross fiscal deficit data for FY24 for the Union Government
is Provisional Actuals, and for the state governments, it is a Budget Estimate.

29
Economic Survey 2023-24

Box I.2: Strengthening the Statistical System

A sound and dynamic statistical system is the cornerstone for an informed citizenry, data-
driven policies and decision-making. Official statistics play a pivotal role in addressing
societal challenges and promoting inclusive growth. The government is taking many
steps aimed at strengthening administrative and survey statistics, building capacities and
improving data quality and timeliness.

MoSPI, the cornerstone

MoSPI is the nodal ministry for the planned and integrated development of the Indian
statistical system. MoSPI anchors the core statistics by publishing GDP, price and
volume indices and countrywide surveys of macroeconomic and sectoral importance. The
Ministry has initiated various new surveys, namely, the annual survey of unincorporated
sector enterprises, a time-use survey and started a pilot for an annual survey of service
sector enterprises. MoSPI is also working towards increasing the frequency of PLFS data
and extending the generation of quarterly estimates for rural areas. Modern IT tools are
being adopted for improved data capturing and processing. To encourage greater use of
administrative data, a National Metadata Structure is also being developed. The Unified
Data Portal project has been envisaged by MoSPI with the objective of creating a centralised
database and storage system. Ministries are also taking initiatives to enhance the frequency
of various surveys to make more informed policy decisions. Given India’s 2047 goals, it
is important for development policy that (a) MoSPI is capacitated fully to produce and
integrate all required statistics with the desired quality, regularity and timeliness and (b)
the quality and timeliness of administrative and transactional data of the line Ministries are
brought to levels that fully facilitate timely course corrections.

Further steps to strengthen the statistical database

a) An extensive exercise for base revision of important economic statistics is being taken
up at MoSPI. The exercise to change the base year of CPI from 2012 to 2024 has been
initiated. An Advisory Committee on National Accounts Statistics has been set up to
decide on the base year for GDP. It is important that the base year of critical data series like
the GDP, different price indices and volume indices like Index of Industrial Production
(IIP) are updated to the most recent feasible year at the earliest. The ongoing efforts
to construct the producer price index for goods and services may be expedited to have
a greater grasp of episodes of cost-push inflation. State-level variants of indices like IIP
will help understand the emerging geographical patterns. Survey data to help understand
private sector capital formation at regular intervals will also help policy formulation.
b) The high-frequency price monitoring data for essential food items collected by different
departments may be linked in such a way that the build-up of prices at each stage from
the farm gate to the final consumer is quantifiable and monitorable. This will help
improve the effectiveness of administrative action by the Government to stabilise prices
of essential food items.

30
 State of the Economy

c) More than 1.3 crore entities are registered under GST and file returns. The granular GST
data, if made available, has great potential to analyse the health of businesses, screening
of loan applications, provide support for cash flow-based lending, and understand the
economies of different geographies deeply.
d) The XV Finance Commission observes, “The CAG, which is mandated to carry out the
role of accounts compilation and finalisation for almost all the States, as well as being the
auditor of both the Union and the States, is already in the process of establishing common
fiscal data standards. This would eventually ensure the availability of standardised data
through a public web portal for granular level fiscal statistics of the Union and the States,
both for historic audited fiscal data and high-frequency fiscal data for the current year in
downloadable database formats.”39 Granular time series, in database formats, of audited
accounts of the Union and the States will make fiscal analysis and policy much easier.
e) Regular indicators of the dynamics of production and employment in MSMEs are
essential, considering their potential for growth and job creation.
f) Information may be published on industry-wise gross disbursement of bank credit (as
opposed to the data on outstanding credit currently available), industry-wise monthly
gross financial flows through domestic and external equity and debt routes, and other
financing sources.
g) There is also a need to have a regular mechanism to aggregate the financial flows to
infrastructure and physical progress- sectorally and geographically differentiated-
achieved in different infrastructure sectors, at least on an annual basis.
h) The large volume of data generated by schemes such as Pradhan Mantri Jan Arogya
Yojana and Ayushman Bharat Digital Mission, which capture details such as hospital
admissions, patients’ medical history or demographic details. These can be used for
disease surveillance, preventive medication, etc.
i) The Labour Bureau is also tasked with conducting five surveys relating to workers and
employment. Ensuring rigour, timeliness and user-friendliness of data and making it
available in database formats will help analysis and policy40.
The thrust on evidence also necessitates that the process and impact evaluation capacities
in the Union and State Governments and universities are nurtured and driven towards
maturity in a time-bound manner.

INCLUSIVE GROWTH
Shift in the approach to welfare
1.47 India’s social welfare approach has undergone a shift from an input-based approach
to outcome-based empowerment. Saturation of basic necessities has been recognised as
imperative to achieve this, thus impelling an array of flagship initiatives. Government initiatives
like providing free-of-cost gas connections under PM Ujjwala Yojana, building toilets under

39 https://tinyurl.com/2dbutsvt
40 https://tinyurl.com/5xrrja3c

31
 Economic Survey 2023-24

the Swacch Bharat Mission, opening bank accounts under Jan Dhan Yojana, building pucca
houses under PM-AWAS Yojana have improved capabilities and enhanced opportunities for
the underprivileged sections.

1.48 The approach also involves the targeted implementation of reforms for last-mile service
delivery to truly realise the maxim of “no person left behind”. These include the Aspirational
Districts Programme, launched in 2018, for focusing efforts on the most backward regions, the
success of which inspired the Aspirational Blocks Programme launched in 2023; the Vibrant
Villages Programme for border areas; and more recently, the Viksit Bharat Sankalp Yatra,
which saw the participation of 15 crore people in two months starting 15 November 202341. The
digitisation of healthcare, education and governance helps improve the gains for every rupee
spent. The Direct Benefit Transfer (DBT) scheme and Jan Dhan Yojana-Aadhaar-Mobile trinity
have been boosters of fiscal efficiency and minimisation of leakages, with ₹36.9 lakh crore
having been transferred via DBT since its inception in 2013 (DBT Portal.42).

Chart I.59: Beneficiaries under various government

 welfare schemes since their inception

Jan Dhan Yojana- 51.6 crore beneficiaries

11.7 11.6
10.3

6.9
Crore

2.6

Swacch Bharat Jal Jeevan Mission PM Ujjwala Yojana Ayushman Bharat PM-AWAS Yojana
Mission (Toilets built) (tap water (gas connections Scheme (Hospital (pucca houses built)
connections) provided) admissions)
Source: Various PIB Press Releases 

1.49 On the employment front, according to the annual PLFS, the all-India annual
unemployment rate (persons aged 15 years and above, as per usual status) has been declining
since the pandemic. This has been accompanied by a rise in the labour force participation rate
and worker-to-population ratio. Even by the relatively strict standards of current weekly status,
employment has recovered from the pandemic in urban and rural areas. From the gender
perspective, the female labour force participation rate has been rising for six years, i.e., from
23.3 per cent in 2017-18 to 37 per cent in 2022-23, driven mainly by the rising participation of
rural women.

41 1 5 Crore Participants in Two Months Viksit Bharat Sankalp Yatra draws huge crowds across many states, 17 Jan
2024 (https://tinyurl.com/55xae4b3)
42 https://dbtbharat.gov.in/

32
 State of the Economy

Chart I.60: Declining unemployment rate and improvement in labour

force participation rate and worker population ratio
LFPR WPR UR (RHS)
70 7
60 6
50 5
Per cent

Per cent
40 4
30 3
20 2
10 1
0 0
2017-18

2018-19

2019-20

2020-21

2021-22

2022-23
Source: Annual Report, PLFS, July 2022 - June 2023, MoSPI

1.50 As a result of the systematic focus on addressing individual deprivations, the incidence of
poverty has reduced remarkably. This is reflected in the steep decline in the headcount ratio of
multidimensionally poor between 2015-16 and 2022-23, as per NITI Aayog’s discussion paper
on multidimensional poverty in India43.
1.51 The initiatives in the social sector have also translated into rising consumption spending,
as evident from the results of the latest Household Consumption Expenditure Survey (HCES)
2022-23. The HCES throws many reassuring findings on inclusive growth in the past decade.
The monthly per capita consumption expenditure (MPCE) in 2022-23 increased in real terms
in both rural and urban areas over 2011-12. The difference between rural and urban MPCE also
declined in percentage terms.

Chart I.61: Reduced rural-urban Chart I.62: Population that is

inequality multidimensionally poor has declined
Rural Urban Urban-Rural Difference (RHS) Headcount Ratio
7000 88.2 100
83.9
Per cent of population who are

90 24.85%
6000
multidimensionally poor

71.2 80
Average MPCE (₹)

5000 70
60 14.96%
Per cent

4000
50 11.28%
3000 40
2000 30
20
1000
10
0 0 2015-16 2019-21 2022-23
2009-10 2011-12 2022-23 (Projected)

Source: Survey on Household Consumption Source: Multidimensional Poverty in India since 2005-
Expenditure: 2022-23, MoSPI; Note44 06- A Discussion Paper, Niti Aayog

43 N
 ITI Aayog’s discussion paper, ‘Multidimensional Poverty in India since 2005-06’, 2023 (https://tinyurl.
com/4yvmrcax)
44 Urban-rural difference is calculated as the difference a percentage of rural MPCE.

33
Economic Survey 2023-24

OUTLOOK
1.52 The Indian economy recovered swiftly from the pandemic, with its real GDP in FY24
being 20 per cent higher than the pre-COVID, FY20 levels. This meant a CAGR of 4.6 per cent
from FY20, despite a 5.8 per cent decline in FY21 inflicted by the pandemic. Analysis in this
chapter shows that the current GDP level is close to the pre-pandemic trajectory in Q4FY24.
During the decade ending FY20, India grew at an average annual rate of 6.6 per cent, more or
less reflecting the long-run growth prospects of the economy. This is the background against
which we can see the prospects for FY25.

1.53 IMF projects the global economy to grow at 3.2 per cent in 2024, with risks being broadly
balanced. The average annual global growth was 3.7 per cent during the decade ending FY20.
Inflationary pressures have moderated in most economies with declining global commodity
prices and easing of supply chain pressures. However, core inflation remains sticky and driven
by high service inflation. Many central banks have hinted at the peaking of the interest rate hike
cycle. The ECB has already cut the policy rate, while the Fed has hinted at reducing the rate in
2024. If the services inflation across economies moderates faster, that may allow central banks
to bring forward the monetary policy easing cycle earlier than currently anticipated. A likely
reduction in policy rates by central banks of AEs, especially the Fed, will open the space for
central banks of EMEs to follow the lead, bringing down the cost of capital.

1.54 On the downside, 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. The global trade outlook for 2024 remains positive, with merchandise
trade expected to pick up after registering a contraction in volumes in 2023. Conversely,
increased fragmentation along geopolitical lines and renewed thrust on protectionism may
distort merchandise trade growth, impacting India’s external sector. Global financial markets
have scaled new heights, with investors betting on global economic expansion. However, any
corrections in the elevated financial market valuations may have ramifications for household
finances and corporate valuation, negatively impacting growth prospects. Hiring in the
information technology sector had slowed down considerably in FY24, and even if hiring does
not decline further, it is unlikely to pick up significantly. However, leveraging the initiatives
taken by the government and capturing the untapped potential in emerging markets, exports of
business, consultancy and IT-enabled services can expand. Despite the core inflation rate being
around 3 per cent, the RBI, with one eye on the withdrawal of accommodation and another on
the US Fed, has kept interest rates unchanged for quite some time, and the anticipated easing
has been delayed.

1.55 Domestic growth drivers have supported economic growth in FY24 despite uncertain
global economic performance. Improved balance sheets will help the private sector cater to
strong investment demand. A note of caution is warranted here. Private capital formation after
good growth in the last three years may turn slightly more cautious because of fears of cheaper

34
 State of the Economy

imports from countries that have excess capacity. While merchandise exports are likely to
increase with improving growth prospects in AEs, services exports are also likely to witness
a further uptick. A normal rainfall forecast by the India Meteorological Department and the
satisfactory spread of the southwest monsoon thus far are likely to improve agriculture sector
performance and support the revival of rural demand. However, the monsoon season still has
some ways to go. Structural reforms such as the GST and the IBC have also matured and are
delivering envisaged results. Considering these factors, 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.

********

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