UPSC Issue at a Glance | Economic Survey 2024-25 Decoded — What it says, what it warns, and what it recommends

Why is this issue relevant?

The Economic Survey is the comprehensive analysis of the economy that is conducted from within the Union government. Its observations and details provide an official framework for not only analysing the Indian economy but also sheds light on the challenges faced by our economy and the required solutions. It is an important document for the UPSC CSE, as questions have been asked based on it, and it also provides fodder for mains answers.

UPSC Syllabus: 

Preliminary Examination: Economic and Social Development – Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Mains Examination: General Studies-II, 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 and Government Budgeting.

Question 1: What is the Economic Survey and its significance?

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.

Economic Survey’s significance

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.

Ever thought if the Economic Survey has a Constitutional Backing? 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.

Question 2. What are the key highlights of the Economic Survey 2024-25?

The key highlight of Economic Survey 2024-25 are:

State of the Economy

• While the Survey sounds sanguine about India’s post-pandemic economic recovery, on the whole, it sounds an alert. “India faces limitations in producing critical goods at the scale and quality required to serve the infrastructure and investment needs of an aspiring economy,” says the preface of the Survey.

• The Survey contends that the domestic economy remains steady amidst global uncertainties. Real Gross Domestic Product, which maps economic activity from the demand side of the economy, in the financial year (FY25) is pegged at 6.4%; in the financial year 2025-26, the Survey expects it to lie between 6.3% and 6.8%.

• Growth in the first half of FY25 was supported by agriculture and services, with rural demand improving on the back of record Kharif production and favourable agricultural conditions. The manufacturing sector faced pressures due to weak global demand and domestic seasonal conditions.

• Private consumption remained stable, reflecting steady domestic demand. Fiscal discipline and strong external balance supported by a services trade surplus and healthy remittance growth contributed to macroeconomic
stability.

Monetary and Financial Sector Developments

• India’s monetary and financial sectors have shown strong performance in the first nine months of FY25. Bank credit has grown steadily, with credit growth aligning with deposit growth.

• The government has made significant advancements in financial inclusion, with the Financial Inclusion Index of the Reserve Bank of India (RBI) rising from 53.9 in March 2021 to 64.2 by the end of March 2024.

• The banking sector is showing improvements in asset quality, strong capital buffers, and solid operational performance. As of the end of September 2024, the gross non-performing assets (GNPAs) of Scheduled Commercial Banks decreased to a 12-year low of 2.6 percent of gross loans and advances.

• Additionally, India’s insurance market is continuing to grow and perform well. India’s pension sector also experienced growth.

• As of September 2024, ₹3.6 lakh crore has been realized through the resolution of 1,068 plans under the Insolvency and Bankruptcy Code. This amount represents 161 percent of the liquidation value and 86.1 percent of the fair value of the involved assets.

External Sector

• India’s external sector continued to display resilience amidst global economic uncertainties. Total exports have registered a steady growth of 6% (YOY) in the first nine months of FY25.

• India accounts for seventh-largest share in global services exports, underscoring India’s global competitiveness in the sector.

• India’s Balance of Payments (BoP) position has remained stable, led by resilient services exports, benign crude oil prices, renewed foreign portfolio inflows, and a revival in FDI flows.

• India holds 10.2 percent of the global export market in Telecommunications, Computer, and Information Services, making it the second largest exporter in the world according to UNCTAD.

• India remained the top global recipient of remittances, helping contain the Current account deficit (CAD) at 1.2% of GDP.

Inflation

• According to the Survey, retail headline inflation has decreased from 5.4 per cent in FY24 to 4.9 per cent between April and December 2024. However, food inflation, as measured by the Consumer Food Price Index (CFPI), has risen from 7.5 percent in FY24 to 8.4 percent in FY25 (April-December). This increase is primarily driven by certain food items, particularly vegetables and pulses.

• The RBI and the IMF have projected that India’s consumer price inflation will progressively align towards the inflation target in FY26.

Investment & Infrastructure

• In the past five years, building infrastructure—physical, digital, and social—has been a key focus for the Government. This initiative has involved various aspects, such as increased public spending on infrastructure, the establishment of institutions to streamline approvals and execution, and the exploration of innovative methods for mobilizing resources. According to Survey, In FY25, capital expenditure has gathered momentum post elections.

• The National Infrastructure Pipeline (NIP) was launched with a forward-looking approach, targeting a projected infrastructure investment of around ₹111 lakh crore from FY20 to FY25. The NIP serves as a centralised platform for hosting projects of states, union territories and central ministries to facilitate their monitoring and review.

• To encourage private investment in brownfield assets, the National Monetisation Pipeline (NMP) was launched in August 2021. This initiative established a monetisation policy framework and identified a pipeline of potential core assets valued at approximately ₹6.0 lakh crore for the period from FY22 to FY25.

• Recent initiatives in the rail system

— Gati shakti multi-modal Cargo Terminal (GCT): 91 GCTs commissioned and 234 locations approved by October 31, 2024.
— Net zero carbon emission: Indian Railways targets 30 GW of renewable energy by 2029-30, with 375 MW of solar and 103 MW of wind commissioned as of October 2024.
— Major economic corridors: 434 projects valued at ₹11.17 lakh crore have been identified under three railway corridors, mapped on the PM Gati Shakti portal.
— Amrit Bharat Station Scheme: Under this initiative, aimed at enhancing railway station amenities, 1337 stations have been identified for redevelopment; work has started in 1197 of them.
— Kavach: This indigenously developed Automated Train Protection system has seen ₹1,547 crore invested (till November 2024). The specification version 4.0 was approved on July 16, 2024.

• New airports and improved regional connectivity under the Ude Desh ka Aam Naagrik (UDAN) scheme have improved air connectivity considerably.

• Major international linkages in port sector

— Chabahar Port and INSTC: Shahid Beheshti Port at Chabahar connects Mumbai to Eurasia via the INSTC, reducing transport costs and time.
— Sittwe Port, Myanmar: Sittwe Port, part of the Kaladan Project, offers an alternative route to north-eastern states, reducing transport costs between Kolkata and Mizoram.

• There have also been key improvements in maritime infrastructure and urban waterways. In October 2024, the National Maritime Heritage Complex in Lothal was approved.

Industry

• Industries such as steel, cement, chemicals, and petrochemicals have stabilised industrial growth, while consumer-focused sectors like automobiles, electronics, and pharmaceuticals have emerged as growth drivers. As we progress, fostering R&D investments, innovations, enhancing the growth and formalisation of smaller manufacturers will drive growth across various sectors. State-level analysis indicates that business reforms in states are likely to foster industrial development.

• Cement: Currently, India is the second largest cement producer in the world after China. Most of the cement plants in India are located in proximity to the raw material source. About 87 per cent of the cement industry is concentrated in the States of Rajasthan, Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, Gujarat, Tamil Nadu, Maharashtra, Uttar Pradesh, Chhattisgarh, Odisha, Meghalaya and West Bengal.

• Steel Industry: In April-November of FY25, the country’s crude steel and finished steel production registered a growth of 3.3 per cent and 4.6 per cent. There has been an overall upward
trend in steel production and consumption during April-November FY25 despite some month-on-month fluctuations.

• Chemical and Petrochemical Sector: The share of chemicals and chemical products sector in the GVA of manufacturing sector (at 2011-12 prices) was 9.5 per cent during FY23. The country is a net importer of these products, with a dependence on imports of around 45 per cent of petrochemical intermediates11. Reducing the gap between domestic demand and supply is a high priority.

• Textiles: The textile industry is a major employment generator and it accounts for about 11 per cent of India’s manufacturing GVA. India is a leading producer of jute and ranks second globally in cotton, silk, and man-made fibre production. India is the sixth largest exporter of textiles and apparel and has a share of about 4 per cent of the global trade in this segment.

• Intellectual Property: India has a robust intellectual property ecosystem. As per the WIPO Report 2022, India ranks sixth among the top 10 patent filing offices globally. Patent applications are largely in computer & electronics, mechanical & biomedical, and communication
fields.

Service  Sector

• The service sector has been fuelling growth both domestically and globally. In FY25 so far, services propped up GDP growth when manufacturing has been affected by dampening global merchandise trade. The critical role of services exports in strengthening India’s external balance and the increasing ‘servicification’ of the industrial sector adds to its importance to the Indian economy.

• India’s share in global services exports has been steadily rising for the last two decades. India ranks seventh globally, representing a 4.3 per cent share in the global services export.

Agriculture

• India’s agricultural sector has demonstrated remarkable resilience in recent years, marked by consistent growth rates. The ‘Agriculture and Allied Activities’ sector contributes approximately 16 per cent of the country’s GDP for FY241 (PE) at current prices and supports about 46.1 per cent of the population.

• A crucial factor influencing agricultural performance is the impact of weather conditions. Climate variability can present significant challenges; however, farmers with diverse income streams are better positioned to navigate these uncertainties. Allied activities such as animal husbandry, fisheries or agroforestry, can enable the farmers to mitigate the risks effectively.

• The Kisan Rin Portal (KRP) launched in September 2023 addresses key challenges in the Modified Interest Subvention- Kisan Credit Card (MISS-KCC) scheme.

Climate & Environment

• India’s per capita carbon emissions are one-third of the global average, even as it stands among the world’s fastest-growing economies.

• India is the seventh most vulnerable country to climate change.7 It suffers from weather extremes and hazards, slow onset events such as sea-level rise, biodiversity loss, and water insecurity.

• The Ministry of Environment, Forest and Climate Change (MoEFCC) has initiated the process of developing the National Adaptation Plan (NAP).

• In the Economic Survey 2024-25 says the new financial package agreed at the 2024 UN climate conference (COP29) in Azerbaijan to support climate action in the developing world “presents little optimism”.

• With countries required to submit their next round of Nationally Determined Contributions or climate plans for the 2031-2035 period this year, the economic survey said the “funding shortfall may lead to a reworking of the climate targets”.

• The Indian government has introduced various measures to promote environmental sustainability and influence economic behaviour. Initiatives like the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyaan (PM KUSUM) and PM Surya Ghar: Muft Bijli Yojana encourage solar power adoption.

• Several key initiatives have been taken to enhance pro-environment outcomes by implementing measures consistent with LiFE. One notable example is the introduction of the Green Credit Rules, 2023, for implementation of the Green Credit Programme (GCP).

Employment 

•  In 2014, India was ranked as the tenth-largest economy in the world. In under a decade, India surpassed the UK to reach the fourth position. India is poised to be the third largest economy by 2030, after the USA and China. By 2030, India will have a growing working-age population and healthy manufacturing sector. The country’sdemographic trend highlights the growing potential for a demographic dividend.

• According to the Periodic Labour Force Survey, the unemployment rate has significantly declined over time, alongside positive trends in labour force participation and the worker population ratio.

• To fully capitalise on the demographic dividend, it is well-recognised that creating quality jobs that offer sustainable livelihoods is crucial. Simplifying compliances, promoting labour flexibility, and strengthening workers’ welfare are vital for driving sustainable job growth.

• Lowering the fixed costs of doing business through deregulation will create room for enterprises to hire more.

Question 3. What are the main concerns flagged by the Economic Survey?

The Economic Survey 2024-25 has highlighted various concerns regarding the future outlook of the Indian economy’s growth. Some of them are:

1. Unfavourable and challenging global economic environment: CEA V Anantha Nageswaran introduced the Economic Survey, stating that the global economic environment has become unfavorable and challenging, and global trade and investment have “come to a crawl”.

“Global trade dynamics have changed significantly in recent years, shifting from globalisation to rising trade protectionism, accompanied by increased uncertainty,” the Economic Survey says. The impact of this shift in global structural forces is reflected in global trade growth, and “signs of secular stagnation in the global economy are beginning to emerge”.

2. Dominance of China: The second major challenge involves China’s dominance as the world’s manufacturing superpower. China accounts for one-third of all global production and produces more than the next ten countries combined. However, due to global economic fragmentation and upheaval, “the world’s modus operandi of outsourcing manufacturing to China pursued vigorously in the globalisation era is poised for a reset,” says the Survey.

3. Geopolitical  Challenges: Geopolitical uncertainties continue to pose risks to the global economic outlook . Geopolitical risks remain high due to ongoing conflicts that pose significant threats to the global economic outlook. These risks can impact growth, inflation, financial markets, and supply chains. “An intensification of the evolving
conflicts in the Middle East, or the Russia-Ukraine conflict, could lead to market repricing of sovereign risk in the affected regions and disrupt global energy markets, the Economic Survey says.

Survey highlight the geopolitical risk and says, “Heightened risks are also evidenced by other indices, such as the Geopolitical Economic Policy Uncertainty index, which remains elevated due to global concerns about economic policies. ”

4. Regulatory Compliance Burden: The Survey noted that while the government has pursued policies to support MSMEs, like boosting access to finance and providing market linkages, the regulatory compliance burden has remained a challenge, which prevents small firms from growing.

5. Excessive Financialisation: The Economic Survey 2024-25 has warned that excessive financialisation can harm the economy, with potentially severe consequences for a low-middle-income country like India. While acknowledging the increasing reliance on financial markets for funding, the Survey emphasized that financial markets must complement the banking sector to bridge the capital requirement gap.

The Survey warned that “over-finance” can lead to the financial sector competing with the real sector for resources, including skilled labour. This can result in the real economy being deprived of essential resources.

6. Challenge of Cyber Security: The Indian financial sector is undergoing a digital transformation due to technological advancements, which has improved efficiency and accessibility. However, this shift has also led to increased exposure to various cyber threats. These threats, including phishing, ransomware, Distributed Denial of Service (DDoS) attacks, SMS-based scams, and fake or malicious mobile applications, present significant challenges to the stability of the financial system.

Question 4. What are the Survey’s key recommendations?

Some of the key recommendations of Economic Survey are:

1. Deregulation is essential: Among the several recommendations presented in the Economic Survey 2024-25, the most important is the need to deregulate the Indian economy in a way that unleashes economic growth. The Economic Survey underscored that deregulation is more essential for growth of micro, small, and medium enterprises (MSMEs) vis-à-vis large companies. It also called for states to take the lead in Ease of Doing Business (EoDB) 2.0.

The Survey recommended that states should look at regulations pertaining to administration, land, building and construction, labour, utilities, transport, logistics, local trade, and environment, in addition to any sector-specific regulations.

2. Establish Stewarding Institutions: Arguing that India’s workforce in low-skill and low-value-added services remains vulnerable to artificial intelligence (AI), the Economic Survey 2024-25 called for the creation of “robust institutions,” which could help transition workers to medium- and high-skilled jobs, where AI can augment their efforts rather than replace them.

The Survey proposed the concept of “stewarding institutions,” which would be “agile, crosscutting across sectors and up to date on the latest developments, so that they are equipped to identify both opportunities and threats. Stewarding institutions will have to be responsible for designing an approach that delicately balances public welfare without stifling innovation”.

3. Promoting Climate-resilient crop varieties: According to Economic Survey, India faces a persistent deficit in the production of pulses and oilseeds, along with frequent fluctuations in tomato and onion production, leading to price pressures. To address this, focused research is needed to develop climate-resilient crop varieties, enhancing yield and reducing crop damage.

Express View on Economic Survey- “The Survey argues that sustaining high growth over the next two decades will require a “deregulation stimulus”, not a fiscal or monetary stimulus. It has mounted a strong argument for “rolling back regulation significantly”. Or to put it bluntly, “getting out of the way”. There can be no quarrels with this. Excessive regulations, after all, increase costs for business.

In conclusion, the survey indicates that India’s economic outlook for FY26 is balanced. However, challenges to growth include high geopolitical and trade uncertainties, along with potential shocks in commodity prices. Domestically, it is crucial to transform the order books of the private capital goods sector into consistent investment growth. Additionally, boosting consumer confidence and increasing corporate wages will be essential for promoting overall growth. To strengthen its medium-term growth potential, India will need to enhance its global competitiveness through structural reforms and deregulation at the grassroots level.

Post Read Questions

Prelims

(1) Which among the following steps is most likely to be taken at the time of an economic recession? (UPSC CSE 2021)

(a) Cut in tax rates accompanied by increase in interest rate

(b) Increase in expenditure on public projects

(c) Increase in tax rates accompanied by reduction of interest rate

(d) Reduction of expenditure on public projects

(2) India’s ranking in the ‘Ease of Doing Business Index’ is sometimes seen in the news. Which of the following has declared that ranking? (UPSC CSE 2018)

(a) Organization for Economic Cooperation and Development (OECD)

(b) World Economic Forum

(c) World Bank

(d) World Trade Organization (WTO)

(3) With reference to casual workers employed in India, consider the following statements: (UPSC CSE 2021)

1. All casual workers are entitled for Employees Provident Fund coverage.

2. All casual workers are entitled for regular working hours and overtime payment.

3. The government can by a notification specify that an establishment or industry shall pay wages only through its bank account.

Which of the above statements are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

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)

3. What are the challenges and opportunities of the food processing sector in the country? How can the income of the farmers be substantially increased by encouraging food processing? (UPSC CSE 2020)

Read More:

Express View on Economic Survey

What the Economic Survey says: key takeaways from the govt’s report on India’s economy

Economic Survey 2024-25: India’s workforce vulnerable to AI, need ‘robust institutions’ to upskill them

For your queries and suggestions write at roshni.yadav@indianexpress.com

🚨 Click Here to read the Union Budget Special issue of the UPSC Essentials magazine for February 2025. Share your views and suggestions in the comment box or at manas.srivastava@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.