All is well with Indian economy: Economic Survey 2024-25

At a time when falling demand and private investment in the Indian economy have been under scrutiny, the Chief Economic Advisor, V Anantha Nageswaran, in the survey has stated that the slowdown in investment activity is likely temporary.

"Green shoots in capital formation are visible. Union government capex is up 8.2 per cent in July – November 2024 and is expected to pick up further pace," it said.

Citing early results of the RBI’s Order Books, Inventory, and Capacity Utilisation Survey (OBICUS), the survey notes that “the seasonally adjusted capacity utilisation (CU) in manufacturing firms was 74.7 per cent in Q2 FY25, above the long[1]term average of 73.8 per cent."

An analysis of a sample of capital goods companies, cited in the survey, indicates that the order books of these companies have registered a sharp increase of 23.6 per cent in FY24 as against a compund anual growth rate (CAGR) of 4.5 per cent in the preceding four years.

The survey noted that the RBI’s report on private investments showed that investment intentions increased to Rs 2.45 lakh crore for FY25 as compared to Rs 1.6 lakh crore for FY24. Along with fresh investment, some of the existing intentions would spill over and be implemented in FY26, the survey noted.

On the perceived slowdown in capital expenditure – the survey states that after an unprecedented expansion “of capital expenditure in the last four years, it remained subdued during Q1 FY25, owing to general elections. However, it rebounded after July despite a reduction in non-debt receipts owing to an increase in the devolution of taxes to states”.

Capital expenditure grew by 8.2 per cent during July-November 2024. Union government’s capital expenditure on key infrastructure sectors has grown at a rate of 38.8% from FY 20-24.

Until November 2024, defence, railways and road transport accounted for about 75 per cent of the capital expenditure, whereas significant YoY growth occurred in power and food and public distribution.

On private final consumption expenditure as a share of GDP at current prices, the survey notes that it is expected to increase to 61.8% in 2024-25, the highest since 2002-03.

A trend analysis of quarterly de-seasonalised national income data shows that agriculture remains strong, performing above trend levels and that robust rate of growth in recent years has taken the services sector close to its pre-pandemic trend levels. The Industrial sector is also performing above the pre-pandemic levels.

On the banking front, the survey notes the dramatic fall in non-performing assets, that have declined to a 12-year low of 2.6% of gross loans and advances at the end of September 2024. Nearly all major banks reported an improvement in asset quality parameters.

Across industries, bank credit to MSME has grown at a faster pace as compared to credit disbursed to large enterprises. As of end of November 2024, credit to MSMEs registered a growth of 13% (YoY), it was at 6.1 per cent for large enterprises.

The Economic Survey noted that the deficit indicators of the union were comfortably placed, leaving ample room for developmental and capital expenditure in the rest of the year.