Questions and Answers on Finance Ministry's "The Indian Economy: A Decade in Review" Report
The 74-page document titled “The Indian Economy: A Review” authored by Chief Economic Adviser (CEA) V Anantha Nageswaran and his team presents a comprehensive analysis of India’s economic journey over the past ten years. This report is distinct from the official Economic Survey prepared by the Department of Economic Affairs (DEA) and aims to assess the state of the Indian economy and provide insights into its future outlook.
In the preface, CEA Nageswaran expresses India’s confidence in weathering emerging disturbances, highlighting the country’s transition from fragility to stability and strength. Noteworthy is India’s adept management of crude oil supply, and the CEA pegs the growth rate at or above 7% for FY24, projecting another year of 7% real growth in FY25.
The report identifies challenges, including concerns over global supply chains, AI’s impact on services trade, and the significant energy transition challenge. It acknowledges the global struggle for recovery post-COVID, emphasizing the importance of addressing these challenges for sustained growth.
CEA Nageswaran outlines three trends India will encounter, signaling the end of hyper-globalization in manufacturing. The government’s commitment to onshoring and friend-shoring production is highlighted, with a focus on addressing infrastructure deficiencies and financial inclusion to meet rising aspirations.
The preface discusses India’s delicate balance between economic growth and energy transition, commending the nation’s skillful navigation of demands to reduce reliance on fossil fuels. The report underscores India’s progress in non-fossil fuel-based power generation and its commitment to climate change adaptation.
CEA Nageswaran lauds the unprecedented rate of infrastructure development in the last decade. Public sector capital investment has surged, transforming physical and digital infrastructure, including highways, freight corridors, airports, metro rail networks, and trans-sea links.
The report highlights a robust financial sector, emphasizing its willingness to lend. Indian households exhibit good financial health, with Jan Dhan Yojana accounts holding substantial deposits. Household financial assets have risen, and Nageswaran notes the positive trends in non-food credit growth and the reduction of fiscal and current account deficits.
Contrary to 2014, the report notes improved economic conditions regarding jobs and unemployment. The economy has created jobs, with a considerable decline in the unemployment rate post-COVID. The labor force participation rate, particularly for women, has increased, and EPF subscriptions among the younger population have risen steadily.
The report highlights the transformation from high fiscal and current account deficits and double-digit inflation in 2014 to controlled inflation, lower fiscal deficit trends, and a current account deficit just above 1% of GDP. Foreign exchange reserves cover nearly eleven months of imports, indicating a strong economic position.
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