Economic Survey Part I – State of the Economy

Now that the Prelims is fast approaching, it makes sense to present the highlights of Economic Survey 2014-15. As you might know, Economic Survey (ES) is a very important report published by the Ministry of Finance every year before the presentation of the general budget and contains all the important details of the economic year gone by.

For this reason UPSC regularly asks questions from Economic Survey in Prelims and GS Mains papers every year. This is document you just cannot skip. I have started a multiple part series on Economic Survey 2014-15 where different aspect of the ES is discussed in each post.

In this post we shall go through the first chapter of ES on State of the Indian Economy.

Growth in Various Sectors of Economy

The percentage growth over previous years in various sectors is highlighted below:

Sector2012-132013-142014-15
Agriculture,forestry and fishing1.23.71.1
Industry2.34.55.9
Mining and Quarrying-0.25.42.3
Electricity, gas, water supply, and other utility services4.04.89.6
Construction-4.32.54.5
Services8.09.110.6
Trade, hotels and restaurants, transport and communication9.611.18.4
Financing, insurance, real estate and business services8.87.913.7
Community, social and personal services4.77.99.0
GDP (at market prices)5.16.97.4

The base year has been revised from 2004-05 to 2011-12 and this is reflected in the robust GDP growth figure of 7.4% for 2014-15.

India’s Services sector remains the major driver of economic growth contributing 72.4% of GDP growth in 2014-15. Services-sector growth has increased from 8.0% in 2012-13 to 9.1% in 2013-14 and further to 10.6% in 2014-15.

During the last twelve years, India had the second fastest growing services sector after China.

  • Fiscal deficit and Revenue deficit stood at 4.1% and 2.9% of GDP in 2014-15.
  • 2014-15 has witnessed a fall in petroleum subsidy by Rs 4908 crores compared to the corresponding period in 2013-14 due to fuel pricing reforms and fall in the global prices of petroleum products.
  • Headline Inflation in terms of Wholesale Price Index (WPI) which remained persistently high at around 6-9% during 2011-13 moderated to an average of 3.4% in 2014-15 (April-December) due to lower food and fuel prices.
  • Retail Inflation in terms of Consumer Price Index CPI (combined) which remained worryingly high at 9-10% during 2012-13 and 2013-14 also moderated to a low of 5% during July-December 2014.

Factors that Resulted in Moderating Inflation in 2014-15

  1. Global factors like decline in crude prices, soft global prices of edible oils and coal.
  2. Tight monetary policy adopted by Reserve bank of India (RBI) kept the demand pressures under control.
  3. The rupee remained relatively stable vis-a-vis the major currencies which too had a moderating influence on inflation.
  4. Base effect also contributed positively to the decline in headline inflation.

Imports and Exports

Over the last ten years, India’s merchandise trade increased manifold from US $195.1 billion in 2004-05 to $764.5 billion in 2013-14 helping India’s share in global exports and imports improve from 0.8% and 1.0% resp. in 2004 to 1.7% and 2.5% in 2013. Its ranking amongst the leading exporters and importers improved from 30 and 23 in 2004 to 19 and 12 resp. in 2013.

In 2014-15 (April-January), imports grew by 2.2% to $383.4 billion as compared to US $375.3 billion in 2013-14 (April-January). The value of petroleum, oil and lubricants (POL) imports, which accounted for 36.6% of India’s total imports in 2013-14, declined by 7.9% in 2014-15 (April-January) as a result of decline in the price of international crude petroleum products.

The share of gold and silver imports in India’s total imports was 11.4% in 2012-13 and 7.4% in 2013-14. Thus, gold and silver imports are showing a declining trend.

Share of India’s exports: Manufactured goods (63%), crude and petroleum products (20%) and agriculture & allied products (13.7%).

Among the major economies with a current account deficit (CAD), India is the second largest foreign exchange reserve holder after Brazil. India’s foreign exchange reserves stood at US $330.2 billion as on February 2015.

Financial Inclusion and Demography

  • The Pradhan Mantri Jan Dhan Yojana was launched in 2014 to achieve the goal of financial inclusion by ensuring at least one basic banking account for every household.
  • India’s Total Fertility Rate (TFR) is steadily declining and stood at 2.3 as of December 2014. India is projected to be the youngest nation in the world by 2020.
  • However, child sex ratio is also on the decline which is a major cause for concern and a new girl child-centric scheme called Beti Bachao Beti Padhao has been launched for the protection and education of the girl child.
  • The latest estimates for poverty are available for the year 2011-12 following the Tendulkar committee methodology. As per this, the percentage of population living below the poverty line is estimated as 25.7 percent in rural areas and 13.7 percent in urban areas and 21.9 percent for the country as a whole.
  • India’s Human Development Index (HDI) stood at 0.586 for 2013 ranking at 135 out of 187 countries. It also ranks low in Gender Development Index (GDI) at 132 out of 148 countries.

Note: Test Series members will receive a downloadable PDF document of the entire Economic Survey series shortly.

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