What is the 'The Indian Economy: A Review' presented by the government all about?

"The Indian Economy: A Review," the 74-page document written by V Anantha Nageswaran, Chief Economic Adviser to the government, and his team of economists, is "not the Economic Survey of India prepared by DEA" but rather a document that takes stock of the state of the Indian economy and its journey in the last ten years.

Nageswaran says that the review offers a brief sketch of the economic outlook for the coming years. Divided into two chapters, the review’s first chapter provides an overview of the past, present, and future of the Indian economy. The second chapter takes a detailed look at the government’s policies and progress on various parameters in different sectors.

CEA Nageswaran, in the preface to the report, says that India is quite confident of weathering the emerging disturbances, and the country has seen a journey from fragility to stability and strength. India’s deft management of the crude oil supply at reasonable prices in the last two years is noteworthy, and many young Indians not only aspire to a better life but are also confident that it will happen in their lifetime.

Pegging the growth rate of the Indian economy at or above 7% for FY24, the CEA said that, as some predict, it will achieve another year of 7% real growth in FY25, and if the prognosis for FY25 turns out to be right, India will mark the fourth year after the COVID-19 pandemic that the country’s economy will have grown at or over 7%.

“It is one thing for India to grow at 8–9% when the world economy is growing at 4%, but it is another thing to grow at or above 7% when the world economy is struggling to grow at 2%,” said Nageswaran.

Listing the challenges in front of the Indian economy, the CEA highlighted, that the “recent events in the Red Sea may have brought back concerns over reliance on global supply chains, further aggravating the slower growth in global trade in 2023. Exporting one’s way to growth will not be easy. Global economy is struggling to maintain recovery post-Covid because successive shocks have buffeted it. Supply chain disruptions have returned in 2024.”

He further said, “the advent of Artificial Intelligence (AI) with the profound and troubling questions it poses for growth in services trade and employment since technology might remove the advantage of cost competitiveness that countries exporting digital services enjoy…Third, and arguably the most important is the energy transition challenge.”

It also listed that concerns over rising temperatures have led to a single-minded focus on reducing carbon emissions, amidst the determination that the emission of greenhouse gases, particularly carbon, is the most significant causal factor.

Nageswaran lists three trends that India will encounter in the coming years. The era of hyper-globalisation in global manufacturing is over. It does not mean that de-globalisation will be upon us any time soon, as countries are only now discovering the enormous integration of global supply chains.

An alternative to the globalisation of supply chains will take much longer to emerge if it ever does. The government will not deter from pursuing onshoring and friend-shoring of production with a consequent impact on transportation, logistics costs, and, hence, the final prices of products. As the government resolves longstanding problems such as deficient infrastructure and financial exclusion, aspirations rise, and expectations shift higher.

The two key proposed measures mentioned by Nageswaran are talking about the need to lower logistics costs and to invest in product quality to hold on to and expand market share in areas where India has an advantage.

Further speaking on the green initiatives and the outlook, Nageswaran’s preface says that persistent demands from international organisations and advanced nations on developing nations to wean themselves off fossil fuels. The switch to greener energy even as technological and resource obstacles remain and are not on offer from developed countries, and in the short run, there is a trade-off between economic growth and energy transition.

He mentions that India is walking the fine line between the two more skillfully than other nations, with installed non-fossil fuel-based power generation capacity running ahead of targets and India’s unwavering commitment to ensuring steady economic growth generating resources for investment needed for climate change adaptation, building resilience, and mitigating emissions. Thus, the Indian economy is better placed to take on key challenges because of the policies adopted and implemented in the last decade.

He has also lauded the progress that the government has made to build infrastructure at a historically unprecedented rate. Nageswaran said the government has taken overall public sector capital investment from ₹5.6 lakh crore in FY15 to ₹18.6 lakh crore in FY24, as per budget estimates. Whether the total length of highways, freight corridors, the number of airports, metro rail networks, or the trans-sea link, the ramp-up of physical and digital infrastructure in the last ten years is real, tangible, and transformative.

On the financial sector's growth, Nageswaran said that the “financial sector is healthy, its balance sheet is stronger, it is willing to lend and is lending, and non-food credit growth, excluding personal loans, is growing at double-digit rates.”

The CEA highlighted that Indian households are in good financial health, as shown by 51 crore bank accounts under the Jan Dhan Yojana, which now have total deposits of over ₹2.1 lakh crore, including over 55% by women.

In December 2019, household financial assets were 86.2% of GDP; liabilities were 33.4% of GDP. Also, in March 2023, these numbers were 103.1% and 37.6%, respectively. The net financial assets of households were 52.8% of GDP in December 2019, and by March 2023, it had improved to 65.5% of GDP.

Nageswaran’s preface has also stated that when it comes to jobs and unemployment, the "economy has created jobs; the unemployment rate has declined considerably from the peaks during Covid times.”

The labour force participation rate has increased, especially that of women, while the net new subscribers to the Employee Provident Fund (EPF) have steadily risen post-COVID, especially among the younger population.

Nageswaran also highlighted that in 2014, the Indian economy was beset with high fiscal and current account deficits and double-digit inflation, and now, inflation is under control, the fiscal deficit is trending lower, and the current account deficit is just above 1% of GDP. Further, foreign exchange reserves cover nearly eleven months of imports.