1) Key Takeaways from the Economic Survey 2024-25

GS 3: Economy: Economic Survey

Why is it in the news?

• The Economic Survey for 2024-25, tabled by Finance Minister, provides an overview of the Indian economy’s performance and outlook.
• Prepared by the Department of Economic Affairs under the Chief Economic Advisor (CEA), the Survey highlights global economic challenges, domestic economic stability, inflation, employment, and policy recommendations.

Global Economic Context

• The Survey flags two major concerns in the global economy. According to CEA, global trade and investment have slowed significantly due to rising trade protectionism and uncertainty. The shift from globalization to economic fragmentation has led to stagnation in global trade growth.
• Additionally, China’s dominance in manufacturing remains a challenge, as it accounts for a third of global production, surpassing the combined output of the next ten largest economies. However, the Survey notes that global economic upheavals are prompting a reassessment of reliance on China for manufacturing.

India’s Economic Performance

• Despite global uncertainties, the Indian economy remains resilient. The Survey projects a real GDP growth of 6.4% in FY25, with an expected range of 6.3%-6.8% in FY26.
• Private final consumption expenditure, which represents consumer spending, is estimated to rise from 60.3% of GDP in FY24 to 61.8% in FY25—the highest since FY03.
• On the supply side, measured by Gross Value Added (GVA), India’s growth remains close to its decadal average. Aggregate GVA surpassed pre-pandemic levels in early FY25 and continues to stay above trend.

Inflation Trends

• The Survey indicates a moderation in headline inflation, primarily due to declining core inflation, which excludes food and fuel. However, food inflation has risen from 7.5% in FY24 to 8.4% in FY25, driven by supply chain disruptions and adverse weather conditions.
• Additional Economic Advisor acknowledged high food inflation but argued that excluding volatile items like vegetables and pulses brings inflation closer to the 4% target.

Employment Growth

• The Indian labour market has improved, supported by post-pandemic recovery and formalization. The 2023-24 Periodic Labour Force Survey (PLFS) shows positive trends in key employment metrics, including unemployment rate, labour force participation rate, and worker-to-population ratio.
• The Survey highlights that employment growth is linked to economic reforms and business-friendly policies.

Policy Recommendations

• The CEA strongly recommends deregulation to unlock economic growth by reducing business constraints. Simplifying regulations, particularly for small businesses, will lower operational costs, boost hiring, and stimulate income and consumption.
• The Survey cites the Business Reform Action Plan (BRAP) by the Department for Promotion of Industry and Internal Trade (DPIIT), which shows a positive correlation between business-friendly reforms and industrial growth. Aspiring states should adopt such policies to foster economic expansion.

Cautionary Outlook

• While acknowledging India’s economic recovery, the Survey also warns of challenges. It notes that India struggles to produce critical goods at the scale and quality needed for infrastructure and investment growth.
• The CEA emphasizes that governments should “get out of the way” to allow businesses to focus on innovation and competitiveness. Without such reforms, economic stagnation remains a risk.

Shift in Economic Narrative

• The tone of this year’s Survey contrasts with the optimism of the 2023 Economic Survey. Last year, the CEA praised structural and governance reforms from 2014-2022, drawing parallels to the 1998-2002 period when delayed growth benefits followed reforms.
• The 2023 Survey expressed confidence that, once global shocks like the pandemic and commodity price spikes subside, India’s economy would accelerate in the coming decade.
• However, the 2024 Survey presents a more cautious outlook, stressing the need for proactive policy changes to sustain long-term growth.

2) IAF Officer Shubhanshu Shukla to Pilot Axiom Mission to ISS

GS 3: Science and Technology: Axiom Mission

Why is it in the news?

• Indian Air Force Group Captain Shubhanshu Shukla is set to become the second Indian to travel to space and the first in 40 years.
• Speaking at an Axiom Mission 4 (Ax-4) press conference, Shukla expressed that his journey represents 1.4 billion Indians and aims to inspire future space explorers. The mission is operated by Axiom Space in collaboration with NASA and SpaceX.

More about the news

• During the 14-day stay on the ISS, the crew will conduct scientific research, outreach programs, and technological experiments.
• Shukla is one of the four IAF officers selected for Gaganyaan, India’s human spaceflight mission, scheduled for 2026. However, the Ax-4 mission materialized earlier due to ISRO’s collaboration with NASA.
• The launch is expected between March and June 2025, with Shukla piloting the SpaceX Crew Dragon spacecraft from Kennedy Space Center, Florida.
• Ax-4 includes astronauts Slawosz Uznanski-Wisniewski (Poland), Tibor Kapu (Hungary), and Peggy Whitson (USA). Interestingly, both Poland and Hungary’s first human spaceflights also occurred four decades ago, similar to India.

The astronauts underwent extensive training at multiple space agencies:

• European Space Agency (ESA), Germany – Learning ISS communication, emergency response, and research inside the Columbus module.
• Japan Aerospace Exploration Agency (JAXA), Japan – Training in the Japanese Experiment Module Kibo, including hands-on operations.
• Japan Manned Space Systems Corporation (JAMSS) – Advanced space research procedures.

Axiom Space’s Private Missions

Axiom Space has previously launched three private missions to the ISS:

• Ax-1 (April 2022) – First commercial mission.
• Ax-2 (August 2022) – Further research-based missions.
• Ax-3 (May 2023) – Included the first female commercial space commander and Saudi Arabia’s first astronaut to live on the ISS.

3) Etikoppaka Toys: Andhra’s 400-Year-Old Craft

GS 1: Culture and History: Etikoppaka Toys

Why is it in the news?

• During India’s 76th Republic Day, Andhra Pradesh’s tableau at Kartavya Path, New Delhi, showcased Etikoppaka Bommalu, a 400-year-old wooden toy-making tradition, captivating the audience with its rich craftsmanship.

About Etikoppaka Bommalu

• The craft originates from Etikoppaka, a small village in Andhra Pradesh, renowned for its eco-friendly and artistic wooden toys. The name “Etikoppaka” is synonymous with sustainable craftsmanship, where artisans use lightweight Ankudu wood (Wrightia tinctoria) for intricate carvings.
• The toys are coloured with natural dyes derived from seeds, leaves, and bark, ensuring a non-toxic and child-safe finish. A special lacquer-turning technique is used to give the toys a lustrous and durable finish.

Cultural and Historical Significance

• Etikoppaka toys often depict mythological characters, animals, and musical instruments, connecting them to India’s cultural heritage. Some designs reflect motifs from ancient civilizations like Mohenjo Daro and Harappa.
• Popular crafts include spinning tops, household decorations, musical instruments, and Raja-Rani figurines. Recognizing their authenticity and heritage, Etikoppaka Bommalu received a Geographical Indication (GI) tag in 2017.
• These toys have also gained international recognition, attracting collectors and eco-conscious buyers.

Other GI-Tagged Toys in India

Several other Indian wooden toy traditions hold GI tags, showcasing regional craftsmanship:

• Channapatna Toys (Karnataka) – Famous for vibrant colours and an eco-friendly lacquer finish.
• Nirmal Toys (Telangana) – Known for intricate carvings and artistic craftsmanship.
• Indore Leather Toys (Madhya Pradesh) – Crafted from leather, these toys depict lifelike animal figures.
• Kondapalli Bommallu (Andhra Pradesh) – Traditional wooden dolls painted in bright colours using local wood.

4) Economic Survey 2024-25: Key Highlights and India’s Growth Prospects

GS 3: Economy: Economic Survey

1. I) Global Economic Growth and Projections

• The global economy grew by 3.3% in 2023, with the International Monetary Fund (IMF) projecting an average global growth of 3.2% over the next five years, which is considered modest by historical standards, according to the Economic Survey 2024-25.
• The Economic Survey notes that global growth in 2024 was steady but uneven across regions. Manufacturing faced a slowdown, particularly in Europe and parts of Asia, due to disruptions in supply chains and weak external demand.
• Conversely, the services sector performed better, supporting growth across many economies. Although inflationary pressures eased globally, services inflation remained persistent.

1. II) India’s Economic Growth in FY25

• Despite global uncertainties, India has shown steady economic growth. India’s real GDP growth for FY25 is projected at 6.4%, which is near the decadal average.
• On the demand side, private final consumption expenditure is estimated to grow by 7.3%, mainly driven by a recovery in rural demand. On the supply side, real gross value added (GVA) is expected to grow by 6.4%.
• The agriculture sector is projected to rebound with a growth of 3.8%, while the industrial sector is estimated to grow by 6.2%, bolstered by strong growth in construction and utilities.
• The services sector is expected to grow robustly by 7.2%, driven by strong performance in financial services, real estate, professional services, public administration, and defense.
• The Survey projects India’s real GDP growth for FY26 to range between 6.3% and 6.8%, factoring in both positive and negative growth influences.

III) Medium-Term Growth Outlook and Global Factors

• The Chapter on Medium-Term Outlook in the Economic Survey highlights the importance of strengthening domestic growth amidst global uncertainties, such as economic policy changes and trade policy challenges.
• The Survey emphasizes that to achieve the vision of Viksit Bharat by 2047, India’s growth trajectory must consider emerging global factors like Geo-Economic Fragmentation (GEF), China’s manufacturing dominance, and global dependency on China for energy transitions.
• The way forward, as outlined in the Survey, is to reinvigorate domestic growth by focusing on systemic deregulation. This will promote economic freedom for businesses and individuals, enabling them to pursue legitimate economic activities more efficiently.
• A critical aspect of this process involves the implementation of Ease of Doing Business 2.0, aimed at fostering the growth of India’s Small and Medium Enterprises (SMEs).

1. IV) Agricultural and Industrial Growth in FY25

• The Economic Survey 2024-25 notes that agricultural growth in the first half of FY25 remained steady, with a 3.5% growth rate in Q2, showing improvement over the past few quarters.
• This growth was supported by healthy Kharif production, above-normal monsoons, and adequate reservoir levels. Total Kharif food grain production in 2024-25 is estimated at a record 1647.05 lakh metric tonnes (LMT), marking a 5.7% increase over 2023-24 and an 8.2% rise compared to the average of the past five years.
• The industrial sector grew by 6% in the first half of FY25, with an estimated growth of 6.2% for the entire year. Q1 saw a strong growth of 8.3%, but Q2 experienced a slowdown due to factors such as weak demand from manufacturing exports, aggressive trade and industrial policies in major trading nations, and mixed effects of the above-average monsoon.
• The monsoon supported agriculture but also disrupted sectors like mining, construction, and manufacturing. Additionally, the timing of festivals in September and October affected Q2 growth.

1. V) Manufacturing and Services Sector Performance

• India continues to lead global manufacturing growth, as indicated by the latest Manufacturing PMI for December 2024, which remained in the expansionary zone, driven by new business gains, robust demand, and advertising efforts.
• The services sector also performed well, with a 7.1% growth in the first half of FY25. All sub-sectors within services showed strong growth, and India’s services export growth surged to 12.8% during April-November FY25, a significant increase from 5.7% in FY24.

1. VI) Inflation and Fiscal Stability

• The Survey highlights that India’s growth process has been supported by stability in inflation, fiscal health, and external sector balance. Retail headline inflation eased from 5.4% in FY24 to 4.9% in April–December 2024.
• However, food inflation, as measured by the Consumer Food Price Index (CFPI), increased from 7.5% in FY24 to 8.4% in FY25, driven mainly by higher prices for vegetables and pulses.
• The Survey notes that India’s consumer price inflation is expected to align with the target of around 4% by FY26, according to the Reserve Bank of India (RBI) and IMF projections.

VII) Capital Expenditure and Fiscal Performance

• Capital expenditure (capex) as a percentage of total union expenditure has steadily improved from FY21 to FY24. Post the general elections, the union government’s capex grew by 8.2% YoY between July and November 2024, according to the Economic Survey.
• Despite a 10.7% YoY increase in gross tax revenue (GTR) during April-November 2024, the tax revenue retained by the union, after devolution to states, saw minimal growth.
• As of November, the union’s deficit indicators were well within limits, providing sufficient room for continued developmental and capital expenditure for the rest of the fiscal year.
• The Survey notes that GTR of the union and own tax revenue (OTR) of the states grew at a comparable pace during April-November 2024. The revenue expenditure of states rose by 12% YoY, with subsidies and committed liabilities increasing by 25.7% and 10.4%, respectively.

VIII) Banking Sector Stability

• The banking sector remains stable, as evidenced by declining asset impairments, strong capital buffers, and solid operational performance.
• Gross non-performing assets (NPAs) in the banking system have decreased to a 12-year low of 2.6% of gross loans and advances.
• The capital-to-risk-weighted assets ratio (CRAR) for Scheduled Commercial Banks stood at 16.7% as of September 2024, well above regulatory norms.

1. IX) External Sector and Trade Performance

• India’s external sector stability is supported by strong services trade and record remittances. The Survey reports a 1.6% YoY growth in India’s merchandise exports during April–December 2024, while merchandise imports rose by 5.2%.
• Additionally, India’s services exports have propelled the country to secure the seventh-largest share in global services exports, highlighting its competitive position on the global stage.
• The Economic Survey 2024-25 highlights the healthy net inflow of private transfers, supported by remittances from abroad and services trade surpluses.
• India remains the top recipient of remittances globally, benefiting from job creation in OECD economies. These factors have helped keep India’s current account deficit (CAD) relatively contained at 1.2% of GDP in Q2 FY25.

1. X) Foreign Direct Investment and Portfolio Inflows

• Gross Foreign Direct Investment (FDI) inflows saw a revival in FY25, increasing by 17.9% YoY from USD 47.2 billion in FY24 to USD 55.6 billion in FY25.
• However, Foreign Portfolio Investment (FPI) flows were volatile in the second half of 2024, primarily due to global geopolitical and monetary policy developments.

1. XI) Foreign Exchange Reserves and Capital Flows

• India’s foreign exchange reserves increased from USD 616.7 billion at the end of January 2024 to USD 704.9 billion by September 2024, before moderating to USD 634.6 billion on January 3, 2025.
• These reserves are sufficient to cover 90% of India’s external debt and provide an import cover of over ten months, ensuring the country’s resilience against external vulnerabilities.

XII) Labour Market Trends and AI Integration

• India’s labour market has shown positive trends, supported by post-pandemic recovery and increased formalisation. The unemployment rate for individuals aged 15 years and above has decreased from 6% in 2017-18 to 3.2% in 2023-24.
• The labour force participation rate (LFPR) and the worker-to-population ratio (WPR) have also increased.
• The Survey notes that AI adoption could further support economic growth, but addressing barriers to large-scale AI integration is crucial. It calls for a collaborative effort among the government, private sector, and academia to minimize adverse societal impacts.

XIII) Infrastructure Development and Investment

• The Economic Survey emphasizes the need for sustained infrastructure investment to maintain high growth over the next two decades. In railway connectivity, 2,031 km of network was commissioned between April and November 2024, and 17 new pairs of Vande Bharat trains were introduced. Port capacity has also significantly improved in FY25, reducing the average container turnaround time at major ports from 48.1 hours in FY24 to 30.4 hours during April-November FY25.

XIV) Renewable Energy and Green Investments

• The government’s initiatives to boost renewable energy capacity through various schemes, such as PM-Surya Ghar, National Bioenergy Programme, and National Green Hydrogen Mission, have led to a 15.8% YoY increase in renewable energy capacity by December 2024.
• The Survey also underscores the importance of green investments and regulatory measures to support India’s clean energy transition.

1. XV) Social Services and Inequality Reduction

• The Survey reveals a compounded annual growth rate (CAGR) of 15% in government social services expenditure from FY21 to FY25.
• The Gini coefficient, which measures inequality in consumption expenditure, has been declining, indicating positive impacts of government initiatives on income distribution.
• On the education front, the government continues to work towards achieving the goals set out in the National Education Policy 2020 through various programmes such as Samagra Shiksha Abhiyan, DIKSHA, and PM POSHAN.

XVI) Health Sector Performance

• The share of government expenditure in total health expenditure increased from 29% in FY15 to 48% in FY22, while out-of-pocket expenditure decreased from 62.6% to 39.4% over the same period.
• This shift indicates improvements in access to healthcare and a reduction in financial burdens for individuals.

XVII) MSME Sector and Government Initiatives

• The MSME sector remains a vibrant part of India’s economy. The government has launched the Self-Reliant India Fund, with a corpus of ₹50,000 crore, to provide equity funding to MSMEs with scaling potential.
• The Survey stresses the need to reduce excessive regulatory burdens to enhance business efficiency and reduce operational costs.
• A three-step process for states to systematically review regulations for cost-effectiveness is outlined, with the focus on deregulation, legal safeguards, and risk-based regulation.

XVIII) Medium-Term Growth and Economic Reforms

• Looking ahead, the Economic Survey emphasizes that India’s medium-term growth prospects depend on addressing both domestic and global challenges. Geopolitical and trade uncertainties, along with potential commodity price shocks, pose risks.
• However, growth prospects are supported by a rebound in rural demand, agricultural production, easing food inflation, and a stable macroeconomic environment.
• To sustain medium-term growth, India must improve its global competitiveness through structural reforms and deregulation, reinforcing its economic potential.

5) Focus on Business Reforms and Private Sector R&D: Economic Survey 2024-25

GS 3: Economy: Economic Survey

Why is it in the news?

• The Economic Survey 2024-25 presented by Finance Minister emphasizes the need for a coordinated effort across all tiers of government, the private sector, and academia to help India achieve its goal of becoming a global manufacturing powerhouse.
• The Survey highlights that States must take the lead in strengthening India’s manufacturing base, focusing on business reforms and industrial strategies suited to regional geographies.

Disparities in Industrial Growth Across States

• The Survey draws attention to the stark developmental disparities across India’s States. It points out that just four States—Gujarat, Maharashtra, Karnataka, and Tamil Nadu—account for approximately 43% of the total industrial Gross State Value Added (GVA), while six States from the Northeast contribute a mere 0.7%.
• The Survey calls for special attention to the Northeast’s unique geographical challenges and urges States to adopt appropriate industrial strategies to address these disparities.
• Additionally, the Survey mentions that even among industrialized States, only a few, such as Gujarat, Uttarakhand, and Himachal Pradesh, have successfully leveraged industrial growth to generate substantial income levels for their populations.
• It advocates for prioritizing business reforms at the grassroots level and creating an enabling environment for businesses to grow, operate, and close when necessary.

Global Manufacturing Opportunities and Challenges

• The Survey acknowledges that India has successfully captured a share of global manufacturing in the last decade, driven by trends in global industrial diversification. However, India has significant room to grow, with a 2.8% share of global manufacturing, compared to China’s dominant 28.8%.
• The Survey highlights India’s potential to improve the contribution of its industrial sector to GDP, noting that the country’s manufacturing sector still lags behind its counterparts. The economic uncertainty caused by global geopolitical tensions, aggressive trade policies, supply chain disruptions, and the global trade slowdown poses a threat to India’s manufacturing growth.
• In FY25, while industrial growth was initially strong, it fell to 3.6% in the second quarter due to poor export demand, heavy monsoon rains, and varying festival timings. Despite this, some sectors, such as automobiles, saw an uptick in sales during the festival period.

The R&D Challenge and Need for Private Sector Participation

• A significant issue flagged by the Survey is the low level of private sector involvement in research and development (R&D), despite the government’s efforts to promote intellectual property protection and research.
• While government funding dominates R&D in India, developed and emerging economies rely heavily on business enterprises for R&D funding, which accounts for over 50% of the Gross Expenditure on R&D (GERD).
• The Survey draws a comparison with companies like Google and Amazon, which contribute around 70% of R&D spending in the U.S. In India, industrial R&D is limited and sectorally concentrated in fields such as pharmaceuticals, IT, transportation, defense, and biotechnology.
• The Survey emphasizes the need for increased private sector participation in R&D and greater collaboration between industry and academia. It urges the private sector to invest in R&D not just for fiscal incentives but as a commitment to enhancing global competitiveness and profitability.
• The Survey concludes that achieving India’s ambition of becoming a manufacturing powerhouse requires a concerted, sustained effort from the government, private sector, academia, and research institutions.

6) India Needs 8% Growth to Achieve Viksit Bharat by 2047: Economic Survey

GS 3: Economy: Economic Survey

Why is it in the news?

• The Economic Survey 2024-25, presented by Finance Minister stresses that India must maintain an average growth rate of 8% over the next two decades to realize its vision of becoming a developed nation by 2047.
• The report underscores the importance of this target to achieve “Viksit Bharat” on the centenary of independence, while acknowledging that global political and economic factors will influence India’s growth trajectory.

More about the news

• The International Monetary Fund (IMF) projects that India will reach a USD 5 trillion economy by 2027-28 and USD 6.3 trillion by 2029-30, with an annual nominal growth rate of 10.2% from 2024-25 to 2029-30.
• However, recent data suggests a slowdown, with India’s economy growing by just 5.4% in real terms in the July-September quarter, falling short of the Reserve Bank of India’s (RBI) forecast of 7%. The RBI revised its growth forecast for 2024-25 to 6.6%, while the government expects a growth rate of 6.4%.
• Despite the slowdown, India’s GDP grew by 8.2% in 2023-24, maintaining its position as the fastest-growing major economy.
• To sustain long-term growth, the government plans to focus on research and development (R&D), micro, small, and medium enterprises (MSMEs), and the capital goods sector to enhance productivity, foster innovation, and strengthen global competitiveness.
• Additionally, enhancing economic freedom for individuals and small businesses remains a key policy priority to secure medium-term growth.