Economic Survey-2024 and Budget Analysis
India needs to be developed by Indians through Swadeshi technology and by improving the quality and competitiveness of Swadeshi goods and services in order to become an economic power in the whole world with a vision of Bharat@2047. — Dr. Dhanpat Ram Agarwal
The present status of the Indian Economy on the basis of the Economic Survey presented in Parliament by the Hon’ble Finance Minister on 22nd July and the subsequent Budget proposals presented by her on 23rd July suggests that the total size of Indian Economy was Rs. 295 Lakh crores as on 31-03-2024 with an Year on Year nominal GDP growth of 9.6 per cent over the GDP of Rs 269 Lakh crores as on 31-03-2023. On an exchange rate of Rs. 83.40 as on 31-03-2024 it comes to US$ 3.54 Trillion and hence still very far from becoming a US$ 5 Trillion economy as the devaluation keeps us dragging.
The Economic Survey reveals that our economy has grown by 8.2% in the FY 2023-24 and is likely to grow by 6.5-7 per cent in FY 2024-25 and thus being the fastest growing country in the World and particularly when the global economic growth is 3-3.5 percent. The other macro-economic indicators are sound, namely the Current account deficit 0.7%; Retail inflation at 5.4 percent (June 2024, core inflation declined to 3.1%); unemployment rate declined to nearly 3% (pg 33 Economic Survey); Multidimensional poverty declined from 24.85% in 2015-16 to 11.28% in 2022-23 (Economic Survey pg-33); Fiscal Deficit declined from 9.2% in FY 2021 to 5.6% in FY 2024.
In its drive to become Vikasit Bharat@2047, the Finance Minister has outlined that the major focus will be on inclusive growth of poor, women, youth and farmers with primary objectives on improving creativity and innovation, creating more employment opportunities, skilling of youth for their employability and for strengthening the financial assistance to MSMEs and for improvement of infrastructure, manufacturing and ensuring Energy security as part of the major nine priorities.
The Government will focus on productivity and climate resilient Agriculture with emphasis on natural farming with 109 high yielding varieties of seeds and by building Digital Public Infrastructure (DPI) in agriculture for coverage of farmers and their land in 3 years.
Employment linked Incentives have been announced for creation of additional employment with three different schemes A, B and C. Scheme A is for direct benefit transfer to first time employees registered with EPFO with one month wages newly entering the workforce in all formal sectors up to Rs. 15000/- in three installments and is likely to benefit 210 lakh youth. Scheme B is for EPFO contribution for 4 years for the benefit of 30 lakh youth entering employment and under Scheme C, the Government will give up to Rs. 3000/- per month for two years to the Employers for their contribution to the EPFO.
In addition there is a scheme for internships by 500 Corporates by using their CSR funds up to 10% with an allowance of Rs 5000/ per month. This scheme will definitely help the skills of fresh students and provide them an immediate opportunity to learn the practical business environment and will address the question as raised in the Economic Survey about the very poor status of less than 52% employability of the educated youth. This scheme will help in yielding demographic dividends from the rich Human Resources of our country.
The world economy today is surrounded by four major problems and uncertainties due to geopolitical risks, climate-change and global warming, Artificial Intelligence and growing inequality. The Indian economy is not an exception to it and therefore the Finance Minister has tried to walk cautiously and has provided for continuing with Government spending for building infrastructure through capital expenditure of Rs 11 lakh crores. FDI flow has declined globally, private investment is not picking up, and global supply chain is intermittently being affected due to Red Sea insurgencies and due to economic sanctions on various countries by USA and European countries, inflationary situation and rising levels of interest rates and recessionary trend in some advanced countries.
There is a complex problem of increasing trade deficit with China which is more than US$85 Billion and the Economic Survey has indicated the necessity to allow FDI from China to manufacture the goods in India instead of importing and thereby maintaining a balance between trade and investment but it has serious repercussions on national security.
This being the First Budget of Modi 3.0 Government with the support of coalition partners, the Finance Minister has also tried for a rational allocation of resources amongst states with special emphasis on an all-round development of Eastern States (Purvodaya) including Bihar, West Bengal, Orissa, Jharkhand and Andhra Pradesh. The Budget proposals also include certain corrective fiscal measures to bring harmonious structure for taxation of Long term capital gains and for taxation of E-Commerce activities by eliminating equalization levy and for a reduction in rates for foreign companies from 40% to 35%.
However, increasing the limits of Mudra Loan from Rs. 10 lakhs to Rs 20 lakhs and providing collateral free loan facilities with Central Government guarantee will provide a great relief to the ailing MSME sector. The setting up of E-Commerce export hubs will also benefit MSMEs and Artisans for getting remunerative prices of their products in international market. Online Network for Digital Commerce (ONDC) can play a very positive role in linking such digital marketing.
However there is also an increasing concern on over dependence on foreign capital and foreign technology despite there being conscious efforts by the government to develop indigenous technology in defense and space sectors for an Atmnirbhar Bharat. It is also a matter of serious concern that there has been a remarkable decline in household savings in the recent three years which has come down from 22.7% in 2021 to 18.6% in 2023 due to inflationary pressure, and increasing consumption. Similarly there is a quantum increase in the cumulative foreign capital of US$ 2.3 trillion in the form of foreign debt US$ 648.5 Billion, foreign portfolio investment in stock market US$ 678 Billion and FDI US$ 990 Billion as per RBI Bulletin March 2024.
There is a need to review the policy drive for Make in India through foreign capital and reverse the gear by encouraging Indian Diasporas of 3.5 crores NRIs and overseas citizens of India with rich scientific knowledge and with an annual savings of US$ 500 Billion and around US$125 Billion annual remittances. Government can set up a Special Economic Zone earmarked for NRIs and Overseas citizens of India with a tax holiday and all other infrastructural facilities and ensuring them full protection from inspector raj and other regulatory burdens.
India needs to be developed by Indians through Swadeshi technology and by improving the quality and competitiveness of Swadeshi goods and services in order to become an economic power in the whole world with a vision of Bharat@2047. It can be expected that the Government of India will be more democratic in decision making by involving people for an improved collective decision making process.
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