Economic Survey preview: Watch for GDP growth forecast, comments on food inflation, climate strategies

On January 29, two days before the interim Budget for 2024-25 was presented by Finance Minister Nirmala Sitharaman on February 1, the finance ministry came out with a report which estimated a GDP growth rate of close to 7 percent for the ongoing fiscal year.

India's central bank expects the Indian economy to grow at 7.2 percent in FY25. The country's average real GDP growth has been more than 7 percent over the last three years.

On rating agencies

The Economic Survey's take on ratings agencies will be crucial given that past surveys have been critical of them claiming that their methodology failed to capture India's strong economic fundamentals.

Now, given that rating agency S&P Global Ratings in May upgraded India’s sovereign rating outlook to positive from stable, citing robust growth and improved quality of government expenditure, one can expect the survey to weigh in on this development.

On inflation

The survey usually comments on inflation especially its trajectory so far and ahead in the context of the central bank's forecast for the same in a given financial year. The Reserve Bank of India (RBI) expects retail inflation at 4.5 percent in FY25, above the targeted 4 percent.

This time around, one would look out for comments specifically on food inflation as it has stayed over 8 percent for the eighth consecutive month in June. Even headline retail inflation in June rose to a four-month high of 5.08 percent.

On agriculture

The health of the farm sector is critical for the economic and social well-being of the country. India has achieved domestic food security and has become a net exporter of farm output to the world. The potential is, however, larger. The Economic Survey is expected to give details on agricultural productivity, which will hold importance for FY25 as the sector's gross value added (GVA) growth in FY24 was at a multi-year low of 1.4 percent, a decrease from 4.7 percent in FY23. On July 17, the Asian Development Bank (ADB) maintained its GDP growth forecast for India at 7 percent for the current financial year, attributing this to an anticipated rebound in agriculture due to projections of the above-normal monsoon.

"After muted growth in FY23, a rebound in agriculture is expected given the above-normal monsoon projections. This is notwithstanding the slower advance of the monsoon in June. A rebound in agriculture will be important to sustain growth momentum in rural areas," the ADB stated.

On climate and energy security 

Climate change and the environment are not only hot-button issues globally but are critical to India realising its aspirations. Hence, India currently spearheads one of the most robust climate actions through its Nationally Determined Contributions (NDC), which includes an ambitious programme for transitions to clean energy in the world. Despite the adverse impacts of Covid-19 on the economy, the country has enhanced its climate ambition manifold. A major issue towards addressing the global challenge is mobilising timely and adequate climate finance through multilateral development banks.

The Economic Survey is expected to highlight the twenty-first-century challenge of climate change and energy transition. In general, climate across the world has become increasingly erratic, further fortifying upside risks to food prices.

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