The Union government is set to table the Economic Survey 2023-24 in both houses of Parliament today. Union Finance Minister Nirmala Sitharaman will present the pre-budget document in Parliament, a day ahead of the full Budget presentation for 2024-25.
The Economic Survey 2023-24 will be presented in Lok Sabha at 1 pm and in Rajya Sabha at 2 pm, followed by a press conference by Chief Economic Adviser Anantha Nageswaran.
What is an Economic Survey?
The Economic Survey document, prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance and formulated under the supervision of the Chief Economic Adviser, provides insights into the state of the economy and various indicators of 2023-24 (April-March), and some outlook for the current year.
The Economic Survey document may also provide some idea about the tone and texture of the actual Budget for 2024-25, which will be presented on Tuesday.
The first Economic Survey reportedly came into existence in 1950-51, when it used to be a part of the budget documents. In the 1960s, it was separated from the Budget documents and presented the day before the Union Budget.
The most important feature that many will look out for is its central theme. In 2022, the central theme was ‘Agile Approach’, which emphasized India’s economic response to the COVID-19 pandemic shock. In 2023, it was ‘Recovery Complete’, as the economy staged a broad-based recovery from the pandemic-induced contraction, the Russian-Ukraine conflict, and inflation, and ascended to the pre-pandemic growth path. Typically, along with the sectoral chapters, the Survey document also adds new need-based chapters that need focus.
All eyes will be on the major announcements made by the Finance Minister and the government’s forward-looking guidance about the overall economy.
With this upcoming budget presentation, Finance Minister Nirmala Sitharaman will surpass the record set by former Prime Minister Morarji Desai, who presented five annual budgets and one interim budget between 1959 and 1964 as Finance Minister. Sitharaman’s upcoming budget speech will be her seventh. She has surpassed Manmohan Singh, Arun Jaitley, P. Chidambaram, and Yashwant Sinha, who each presented five budgets.
Halwa Ceremony:
A key event before the budget presentation is the ‘halwa ceremony’. A few days before the budget is presented, the government conducts a ‘halwa ceremony’, marking the start of budget document printing.
This year, the Halwa ceremony, marking the final stage of the budget preparation process for the full budget of 2024-25, was held in North Block on July 16 in the presence of Finance Minister Sitharaman, Minister of State Pankaj Chaudhary, and secretaries. Officers and staff involved in the budget preparation and compilation process were also present on the occasion.
The Halwa ceremony is significant as it also marks the beginning of a lockdown at the Finance Ministry, meaning no official is allowed to leave the ministry compound. Everyone on the budget team is allowed to leave only after the financial document is presented in Parliament. The printing of the Union Budget inside the basement located in the North Block has been a permanent feature since 1980.
Budget Day:
On budget day, Tuesday, the Finance Minister will present the Union Budget in the Lok Sabha at 11 am. The budget speech will outline the government’s fiscal policies, revenue and expenditure proposals, taxation reforms, and other significant announcements.
The budget is then subjected to detailed debate and discussion in both houses of Parliament, allowing members to scrutinize its provisions, raise concerns, and propose amendments. Following its presentation and approval by Parliament, the Union Budget sets in motion a series of post-budget activities aimed at implementing its provisions and achieving the outlined objectives.
On the morning of budget day, the Finance Minister will go to the North Block, where the Ministry of Finance is housed. She will meet the secretaries of her ministry, and later, along with them, she will reach the President’s residence to get permission before presenting the Budget. Half an hour before the budget is presented, a Cabinet meeting headed by the Prime Minister is usually held, where ministers are briefed about the budget and Cabinet approval is taken.
Like the previous few full Union Budgets, the budget for 2024 will also be delivered in paperless form.
State of the Economy:
The Reserve Bank of India, in its latest monetary policy meeting, raised the GDP forecast for the current year 2024-25 to 7.2 per cent from 7 per cent earlier. The strength of domestic demand has driven the economy to a 7 per cent plus growth rate in the past few years.
The International Monetary Fund (IMF), in its latest outlook, has raised India’s growth projections for 2024 from 6.8 per cent earlier to 7 per cent, with the country maintaining the fastest-growing status in emerging markets and developing economies. The IMF had earlier projected a growth rate of 6.5 per cent for 2024, revising it to 6.8 per cent and now 7 per cent. India continues to be the fastest-growing major economy.
According to official data from the Indian government, the country’s GDP grew by 8.2 per cent during the financial year 2023-24. India’s economy grew 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22 respectively.
Coming to inflation, RBI projected it at 4.5 per cent for 2024-25. Rising food prices continued to be a headache for Indian consumers with the inflation rate in the food segment almost doubling year-on-year in June. The food inflation almost doubled to 8.36 per cent last month, versus 4.63 per cent reported in the same month of 2023, data showed.
India’s overall retail inflation rate hardened in June, taking a departure from the moderation it witnessed in the past months, pushed by rising food prices. The retail inflation in India is in RBI’s 2-6 per cent comfort level but is above the ideal 4 per cent scenario. Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. The repo rate is the rate of interest at which the RBI lends to other banks.
Faced with food inflation remaining at elevated levels consistently, the Reserve Bank of India recently said that it is too long a period for a food price shock to be termed as transitory.
Highlights of the Interim Budget tabled on February 1, 2024:
The government proposed to increase capital expenditure outlay by 11.1 per cent to Rs 11.11 lakh crore in 2024-25, amounting to 3.4 per cent of the GDP. Capital expenditure, or capex, is used to set up long-term physical or fixed assets.
Coming to the fiscal deficit, the government pegged it for 2024-25 at 5.1 per cent of gross domestic product (GDP). In 2023-24, the government pegged the fiscal deficit target for 2023-24 at 5.9 per cent of gross domestic product (GDP). The fiscal deficit of 2023-24 was downwardly revised to 5.8 percent. The government intends to bring the fiscal deficit below 4.5 per cent of GDP by the financial year 2025-26.
The difference between total revenue and total expenditure of the government is termed a fiscal deficit. It is an indication of the total borrowings that may be needed by the government.
In a relief to the citizens, the central government neither tweaked nor raised the tax burden on citizens. An Interim Union Budget 2024 was presented on February 1, as the country was due for general elections later in the year. The interim budget took care of the financial needs of the intervening period until a government was formed after the Lok Sabha polls, after which a full budget was to be presented by the new government.
The robustness seen in domestic demand–private consumption and investment–traces its origins to the reforms and measures implemented by the government over the last 10 years. Also, firm GDP growth forecasts, inflation at manageable levels, political stability, and signs of the central bank tightening its monetary policy have all contributed to painting a bright picture for the Indian economy.
According to projections, India is expected to become the third-largest economy in the world with a GDP of USD 5 trillion in the next three years. Subsequently, India can aspire to become a USD 7 trillion economy in the next six to seven years (by 2030).