BLISS PLUS

The Indian Economy- A Review

(2023-24 )
Highlights and Summary

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 Important Highlights of the Report
Ahead of the Interim Budget for 2024-25 the Finance Minister presented a 10-year review of the
Indian economy.

• Growth Projection: The review predicts that India’s GDP will grow close to 7% in 2024-25,
with the potential to go “well above” 7% by 2030.
o The economy is expected to expand from about $3.7 trillion this year to $5 trillion
in three years, making it the world’s third-largest, and could even reach $7
trillion by 2030.

• Two Growth Phases: The review divides India’s growth story into two phases:
o 1950-2014 and a “decade of transformative growth” since 2014.
o It highlights that the state of the economy was “far from encouraging” due to
structural constraints, tardy decision-making, and high inflation.
o However, post-2014 reforms have restored the economy’s ability to grow healthily,
making India the fastest-growing G-20 nation.

• Qualitative Superiority: The review asserts that India’s 7% growth (when the world grows at
2%) is “qualitatively superior” to the 8%-9% achieved during the previous era when the
global economy grew at 4%.

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 Summary of the Report

Chapter-1

Indian Economy: Past, Present And Future

The Indian Growth Story (1950 to 2014)

• Pre-Independence Economic Share:

o India's share of world income declined from 22.6% in 1700 to 3.8% in 1952.

• Post-Independence Economic Strategy (1950s):

o The Indian government adopted a strategy in the 1950s.
o Focused on achieving economic self-sufficiency.
▪ Rapid industrialisation
▪ Created large state-owned enterprises (SOEs)
o The decadal average growth rate (1952-60): 3.9%.

• Challenges in the 1960s:

o Slowdown in economic growth during the 1960s.
▪ Decadal growth rate of 4.1%.
o The 1962 Sino-Indian war.
o 1965-66 India-Pakistan war.
o Severe drought in 1965.

• Barriers in 1970s:
o Indian rupee devaluation of 57% during the 1970s.
o The 1970s were marked by severe political instability.
o Imposition of Emergency in 1975.
o Decline in decadal average growth rate during the 1970s, reaching 2.9%.

• Reform Initiatives in the 1980s:

o Removal of Price Controls, Initiation of Fiscal Reforms, Revamp of the Public
Sector, Reductions in Import Duties, De-licensing of the Domestic Industry,
Promotion of Exports
o The 1980s also witnessed greater integration with the global economy, with a focus
on promoting exports.

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 o Modest liberalization combined with significant government spending led to an
improvement in Gross Domestic Product (GDP) growth, reaching 5.7% in the
1980s.

• External Shocks in the Early 1990s:

o The breakup of the Soviet Bloc posed an external shock.
o The Iraq-Kuwait war adversely affected trade and disrupted current account
balances during 1990–1991.
o The external crisis, unsustainable government spending, and internal socio-political
factors led to a Balance-of-Payments (BoP) crisis in 1991.

• Reforms in 1991:
• Eliminating the complex system of rules, permissions, and licenses.
• Reversing the substantial inclination towards state ownership of production facilities.
• Ending the inward-looking trade strategy.
• Real GDP growth averaged 5.8% per annum in the 1990s.

Early 2000s Economic Momentum

• India's Reforms Yield Growth and Capital Influx:

o The growth dividends from transformative reforms implemented during the period
1998-2002 played a key role in economic growth.
o The early 2000s witnessed a global growth boom, and India attracted significant
capital flows.

• Key Measures Implemented:

o Sarva Shiksha Abhiyan (SSA): Focused on universal education.
o National Rural Health Mission (NRHM): Implemented to address rural health
needs.
o National Rural Employment Guarantee Scheme (NREGS): To provide rural
employment.
o Decadal Average Growth Rate: The growth rate in the 2000s was 6.3% per annum.

• Impact of Global Financial Crisis (2008):

o The global financial crisis exposed the fragile foundations of the growth spurt in India.
o Bad debts in banks began to accumulate.
o The bad debt ratio reached double-digit percentages, peaking at 11.2% in March
2018.
o Much of the bad debt originated between 2006 and 2008.

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• High Fiscal Deficits and Loose Monetary Policy (2009-2014):
o In the period 2009-2014, the government attempted to sustain high economic
growth by running high fiscal deficits and maintaining loose monetary policy for
an extended duration.
o Nominal GDP growth remained high during this period.
o India experienced annual double-digit inflation rates for five consecutive years
from 2009 to 2014.

• Twin Deficits and Overvalued Rupee:

o India faced high twin deficits, including a fiscal deficit of 4.9% in FY13.
o The current account deficit was also elevated, reaching 4.8% in FY13.
o The Indian rupee was overvalued during this period.

• Crash of Indian Rupee in 2013:

o The Indian rupee experienced a significant crash against the US dollar.
o Between 2009 and 2014, the Indian rupee depreciated annually by 5.9% on average.

• Outcome of Challenges: The combination of high fiscal deficits, loose monetary policy, twin
deficits, and the overvalued rupee led to economic growth stalling during this period.

Lessons From the Growth Experience Till 2014

• Transition from Closed to Open Economy (1950-1980):

o Import substitution, export subsidies, stringent restraints on technology and
investment cooperation.
o Controls on capacity expansion, licensing requirements for manufacturing
industries.

• Pro-Business Reforms Post-1980:

o Import liberalization, export incentives, exchange rate policies, and expansionary
fiscal policy.
o These reforms were seen to enhance productivity and boost demand through
improved credit availability and high public expenditure.
o Simultaneously, unsustainable investments, questionable loans, opaque allocation
of resources, and high fiscal deficits led to a BoP crisis in 1990-91.
o The BoP crisis triggered comprehensive economic policy overhauls, moving
towards a market economy.
▪ Trade policy reforms
▪ Industrial policy revamping
▪ Foreign Direct Investment (FDI) liberalization

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 o Private sector became the major engine of growth and employment generation
during the 1990s and 2000s.
o Foreign technologies were denied due to a closed economy, lack of resources, and
security reasons.
o Since the 1980s, technology has been progressively used to transform the Indian
economy.

• Challenges in the Indian Economy (Pre-2014):

o GDP growth below 5%
o High Wholesale Price Index (WPI) inflation in food articles
o Accentuated structural constraints.

• Structural Constraints:
o Difficulties in quick decision-making .
o Subsidies limiting fiscal space for public investment.
o Especially in capital goods, and low-value addition in manufacturing.
o Presence of a large informal sector and insufficient labor absorption in the formal
sector.
o Low agricultural productivity due to intermediaries, storage shortages, and inter-
state movement issues.

2014 - 2024: Decade of Transformative Growth

• Structural Reforms and Macroeconomic Fundamentals (Since 2014):

o The Government of India initiated several structural reforms strengthening
macroeconomic fundamentals.
o India emerged as the fastest-growing economy among G20 nations.
o Estimated growth of 7.3% in 2023-24 following 9.1% (FY22) and 7.2% (FY23).

• Post-Pandemic Recovery and Job Generation:

o Urban unemployment rate dropped to 6.6%.
o Net new Employees' Provident Fund Organisation (EPFO) subscribers in the
age group 18-25 consistently exceeded 55% of the total net new EPF subscribers
since May 2023.

• Infrastructure Development:
o Record expansion of road, rail, and air networks.
o 74 airports were built in the last nine years and the number of universities increased
from 723 in 2014 to 1,113 in 2023.

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 o Gross Enrolment Ratio (GER) for girls increased to 27.9% in 2020 from 12.7%
in FY10.
o Total enrolment in higher education rose from 3.4 crore in 2014 to 4.1 crore
students in 2023.

• Effective Crude Oil Management and Fiscal Support:

o Government provided a 50-year interest-free loan of ₹1 lakh crore to states in FY23
and announced another ₹1.3 lakh crore in FY24.
o States utilized more than ₹97,000 crore out of the ₹1.3 lakh crore of interest-free
loans for capital investment in the first eight months of FY24.

• States' Capital Expenditure Increase:

o States capital expenditure increased by more than 47% in the first six months of
April-September 2023 compared to the same period in 2022.

Drivers of India’s Growth in the Last Decade

• Financial Sector Reforms (Post-2020):

o Addressing the financial system crisis post-2020 with reforms such as
recapitalization, Public Sector Banks (PSB) merger, and amendments to the
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest (SARFAESI) Act, 2002.
o Implementation of Insolvency and Bankruptcy Code (IBC) facilitated the clean-
up of balance sheets.

• Simplification of Regulatory Frameworks and Reforms (Since 2014):

o Enactment of Real Estate (Regulation and Development) Act, 2016 promoting
transparent transactions and reducing black money circulation.
o Introduction of Goods and Services Tax (GST), reduction in corporate and income
tax rates, exemption for sovereign wealth funds and pension funds, and removal of
Dividend Distribution Tax to reduce the tax burden on individuals and businesses.
o Enhanced tax base, reduced compliances, formalization of the economy, and
consistently rising monthly gross collections.

• Private Sector Engagement and Disinvestment Policy:

o Revival of the disinvestment policy, introducing New Public Sector Enterprise
(PSE) Policy for Aatmanirbhar Bharat to minimize government presence in PSEs.
o Introduction of initiatives to enhance manufacturing capabilities, promote exports,
and provide Production Linked Incentives (PLI).

• Ease of Doing Business and MSME Sector Reforms:

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 o Decriminalization of minor economic offenses under the Companies Act, 2013,
resulting in ease of doing business.
o Elimination of 25,000 unnecessary compliances and repeal of over 1,400 archaic
laws.
o Introduction of initiatives such as Emergency Credit Line Guarantee Scheme
(ECLGS), redefinition of MSMEs under Aatmanirbhar Bharat, TReDS for
addressing delayed payments, and extension of non-tax benefits for MSMEs.

• Public Spending on Infrastructure (Since 2014):

o Effective Capital Expenditure by the Union government rose from 2.8% of GDP in
FY14 to 4.5% in 2023-24 (BE).
o Programs like Bharatmala, Sagarmala, UDAN, and others addressing
infrastructure and logistics bottlenecks.

• Inclusive Growth Policies (Last Decade):

o Over 10.11 crore women are given free gas connections.
o Construction of 11.72 crore toilets for the poor.
o Opening of 51.6 crore Jan Dhan accounts.
o Over 6.27 crore hospital admissions under the Ayushman Bharat Scheme.
o Construction of 2.6 crore pucca houses for the poor.
Challenges Confronting the Indian Economy

• Energy Security and Transition:

o Balancing energy security and economic growth against the need for energy
transition poses multifaceted challenges.
o Policy actions related to energy choices have geopolitical, technological, fiscal,
economic, and social dimensions.

• Artificial Intelligence (AI) and Employment:

o The advent of AI raises concerns about its impact on employment, particularly in
service sectors.
o An IMF paper estimates that 40% of global employment is exposed to AI,
emphasizing the need for investment in infrastructure and a digitally skilled labor
force in developing economies.

Track Record of Overcoming Challenges

• Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Aims to provide relevant industry skill
training to Indian youth for better livelihoods, with around 1.3 crore candidates trained and 24
lakh individuals placed as of December 2023.

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• Renewable Energy Promotion: Focused efforts to promote manufacturing and use of
renewable energy, resulting in a combined installed capacity of 179.57 GW from renewable
sources, including large hydropower, as of November 2023.

• Internet Penetration: Internet penetration in India crossed 50% in 2022, growing three-fold
since 2014.

• Aadhar Implementation: Aadhar facilitated the transfer of over ₹34 lakh crores to more than
1167 crore beneficiaries under Direct Benefit Transfer (DBT), with over 200 crore Aadhaar-
based authentications monthly.

• Financial Inclusion: Prime Minister’s Jan Dhan Yojana reached 51.5 crore beneficiaries as
of January 10, 2024, with a 3.5-fold growth since March 2015. Notably, 56% of account holders
are women, and two-thirds are in rural and semi-urban areas.

• Covid-19 Response: Successful implementation of one of the world's largest vaccination

programs using the CoWin app, administering 221 crore vaccine doses to the population aged
18 years and above.

• Technological Leap in Space Exploration: Launched 431 foreign satellites, with 396 launched
since June 2014, showcasing advancements in space technology.

• Proactive Approach: India's 'Mission Mode' approach has been effective in addressing
challenges, both existing and emerging.

• Adaptability: The country's ability to convert disadvantages into strengths and use technology
for inclusive growth demonstrates adaptability and resilience.

• Growth Outlook: India's growth is estimated at 7.3% in FY24, with expectations of sustained
strong growth.

• Current Account Deficit: Lowering current account deficit to 1% of GDP in FY24.

• MSME Focus: Reforms unleashing the productive potential of India’s MSMEs with
streamlined regulatory and compliance obligations.

• Land Availability: Ensuring land availability at reasonable prices.

• Energy Needs: Measures addressing the energy needs of the growing economy.

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• G20 Presidency: Successful hosting of G20 Presidency, marking India's arrival as a key
consensus builder on the global stage.

• Chandrayaan-3: Successful reach to the South Pole of the Moon.

• 5G Deployment: Achieved the fastest deployment of 5G globally.

Global Significance and Trust

• Global Presence: Growing importance in the global economic landscape.

• Global Achievements: Major strides in various fields, including space exploration and
technology deployment.

• Citizen Resilience: Path reflects the resilience and determination of Indian citizens founded on
trust.

Chapter-2

Key Factors Responsible for the Resilience of the Indian Economy

• Post-Pandemic Recovery:
o Above-7% Growth: Displayed resilience with two consecutive years of above-7%
growth post the pandemic-induced contraction in FY21.
o Potential Third Year: On track for a third year of above-7% growth in FY24.

• Performance in FY24:
o Achieved 7.6% growth in real terms in the first half of FY24 compared to the first
half of FY23.
o First Advance Estimates by National Statistical Office Estimate indicate an
estimated real GDP growth of 7.3% in FY24, exceeding forecasts by various
agencies.

• Positive Estimates:
o Estimates from the National Statistical Office exceeding forecasts made by various
national and international agencies.
o Possibility of growth surpassing the RBI's projection of 7%, indicating robust
economic performance.

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 Resilience in Multiple Dimensions:
• Economic Growth:
o Resilience evident in declining unemployment rates and rising economic
activity.
o Healthy performance in high-frequency indicators, including E-way bill
generation, rail freight, and port cargo traffic.
o Infrastructure focus and housing demand driving construction activity,
reflected in increased steel consumption and cement production.
o Mobility, particularly air travel, exceeded pre-Covid levels despite
pandemic challenges.

• Banking Sector and Fiscal Discipline:

o Strong balance sheets of public sector banks rooted in RBI's Asset Quality
Review, recapitalization, and enactment of the Insolvency and Bankruptcy
Code (IBC).

• Continuity of Growth Drivers:

o Simultaneous pursuit of energy security and energy transition without
derailing high growth, underway before the pandemic.
o Resilience built on pre-pandemic domestic demand, a crucial pillar
supporting the Indian economy.

• Government Measures Over Ten Years:

o Identified measures across four blocks - Domestic Economy,
Macroeconomic Stability, Human Resources, and External Economy.
o Building resilience to climate change, enabling the pursuit of energy
security and transition without conflict.

Domestic Economy:
• Consistent Post-Covid Recovery:
▪ Estimated to grow at an average of 7.9% between FY22 and FY24.
▪ Few economies globally have maintained post-Covid recovery as
consistently as India.

• Sectoral Contributions:
▪ Manufacturing Sector’s share in Gross Value Added (GVA) increased
from 17.2% (FY14) to 18.4% (FY18) due to the Make in India mission.
Remained robust at 17.7% (FY24) with Production Linked Incentive (PLI)
schemes.

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 ▪ Construction Sector’s share in total GVA was 8.8% (FY14) and almost
recovered to 8.7% (FY24) after countering real estate price increases and
pandemic challenges.
▪ Service Sector’s share in total GVA increased from 51.1% (FY14) to 54.6%
(FY24) due to the pandemic and subsequent unlocking, leading to a surge
in non-contact services. Government's drive towards digitalization,
represented by India Stack, plays a substantial role.

• Private Final Consumption Expenditure (PFCE):

▪ PFCE's share in GDP at current prices increased from an average of 58.4%
in the eight years preceding the pandemic to 60.8% in the last three years
ending FY24.

• Role of PFCE in Post-Covid Growth:

o Private Final Consumption Expenditure (PFCE) has emerged as a major growth
driver post-Covid pandemic.
o India has emerged as the fastest-growing major economy, supported by a resilient
PFCE.
o Robust increase in Per Capita Real Gross National Income (GNI) in the nine years
before the pandemic.
o Registered a Compound Annual Growth Rate (CAGR) of 5.3% from FY12 to FY20.
o Strong government vision, market-friendly reforms, reduced compliance burden,
simplified laws, opening up of sectors, and strategic disinvestment of public sector
enterprises contributed to private sector growth.

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• Foreign Investment and Financial Sector:
o The government has implemented investor-friendly policies, allowing 100% FDI
under the automatic route in most sectors.
o Policymakers contributed to nursing the financial sector back to health.
o Pragmatic monetary policy and coordination of economic and monetary policies
played a significant role.

• Components of PFCE Growth:

o The increase in Private Final Consumption Expenditure (PFCE) is balanced across
durables, semi-durables, and services.
o After witnessing a decline in FY21, durables, semi-durables, and services
registered double-digit growth in FY22.
o SEBI's enhanced market transparency, increased retail participation in the stock
market, and growth in demat accounts generated the wealth effect.
o Government's boost to infrastructure investment created additional employment
and incomes, strengthening PFCE.

• Digital Infrastructure and Economic Potential:

o Digitalization enhanced financial inclusion, formalization of the economy, efficient
service delivery, and transparent governance processes.
o Digitalization directly helped increase private consumption, both pre and post-
pandemic.
o Aarogya Setu and CoWin apps were game-changers during the pandemic,
facilitating tracking, containment, and vaccination efforts.

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 o The pandemic led to shifts in behavior, including virtual healthcare visits, digital
payments, and accelerated grocery shopping.
o Digital payment systems like UPI aided the growth of e-commerce, with a projected
CAGR of 16% between 2022 and 2026.

• Rural Inclusiveness and Welfare Approach:

o Rural India showed increasing social and economic inclusiveness.
o PMJDY provided low-cost bank accounts, and DBT eased the direct transfer of
benefits to these accounts, narrowing the rural-urban divide.
o The government's all-inclusive welfare approach is expected to contribute to
expanding the middle class.

• Transformation in Investment Climate:

o The seemingly impressive investment rate in the first decade relied on excessive
borrowing and over-optimism, leading to an unsustainable situation.
o Banks were reluctant to lend to corporates in the second decade, resulting in a
decrease in the investment share of GDP.
o Stresses on balance sheets accumulated in the first decade, contributing to macro
fragility, high fiscal deficit, high current account deficit, and sustained double-digit
inflation.
o India was included in the infamous club of 'fragile-five' emerging economies.

• Government Initiatives:
o The government took measures to help banks strengthen their balance sheets by
recapitalizing them and restructuring the industry.
o Stronger balance sheets in the non-financial corporate sector and banking sectors
have been achieved.

• Outlook for Investments:

o Growth in investments and credit has shown positive trends in the last three years.
o Data presented in Charts 3 and 4 support the assertion that investments and credit
are poised to increase in the current decade.

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• Government Efforts and Positive Outcomes:
o Efforts have resulted in healthier balance sheets, both in the private corporate sector
and banking sector.
o Positive outcomes include private corporate investment beginning to increase.
o Banks are responding with increased credit disbursement.

• Non-Food Bank Credit Growth:

o Non-food bank credit growth, net of personal loans, had experienced a decline from
above 20% in 2008 to less than 10% in FY 2016.
o There has been a rebound, reaching 13% in FY23 (Chart 4).

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• Public Sector Capital Expenditure (FY15 to FY24):
o Public sector capital expenditure, including Union government capex, grants to
states for capital asset creation, and Central PSEs' investment resources, increased
from ₹5.6 lakh crore in FY15 to ₹18.6 lakh crore in FY24.
o Surge in capital expenditure was 5.1 times during this period.
o Grants to states for capital asset creation increased by 2.8 times, and resources of
PSEs increased by 2.1 times.

• Rebalancing Fiscal Expenditure (FY18 to FY24):

o To facilitate the upscaling of capital expenditure, the Union government rebalanced
its fiscal expenditure.
o Capital spending rose from 12% of total expenditure in FY18 to 22% in FY24
(Budget Estimate).

• Emphasis on Infrastructure Investments:

o The emphasis on infrastructure investments aims to address long-standing supply-
side deficiencies in the Indian economy.

• Government Measures to Boost Infrastructure:

o The government accelerated work on a large pipeline of stalled infrastructure
projects by addressing issues like construction delays, administrative inefficiencies,
financing challenges, legal complexities, and land issues.
o The government digitized bureaucratic procedures, streamlined project approvals,
eased legal constraints, reduced corporate tax rates, implemented a uniform GST
regime, and opened new avenues for private investors.
o The Pragati/Project Monitoring Group (PMG) mechanism has played a crucial role
in expediting the execution of long-delayed projects.

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• Proxy Indicators for Private Capex Upsurge:
o Multiple proxy indicators and industry reports suggest the emergence of green
shoots of a private capex upcycle in the post-pandemic years.
o The Index of Industrial Production (IIP) data indicates robust growth in the capital
goods index (12.9%) and infrastructure/construction goods index (8.4%) in FY23.
o Listed/unlisted corporates indicate expanding private investment in the first half of
FY24.

Rising Household Investments in Real Estate Strengthens the Investment Rate:

• Household Sector Investment Contribution:

▪ Household sector investment constitutes the largest share in the total Gross
Fixed Capital Formation.
▪ Household sector investment was on a rising trajectory just before the
pandemic.
▪ The growth in real-estate prices showed a gradual decline, and there was a
continued increase in bank credit for housing, contributing to the rise in
household sector investment.
▪ After the pandemic, there has been a recovery in housing prices, with the
average annual growth increasing from 2.3% in FY22 to 4.3% in H1 of
FY24.
▪ The uptrend in housing sales and launches, despite factors like increased
real-estate prices and higher interest rates, indicates the strength of the
recovery of incomes and optimism about the future.

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• Sustained Increase in Investment Rate:
o The overall investment rate of the economy for the last three years has consistently
surpassed the levels of FY16 relative to GDP.
o The increase in investments is driven by all three sectors of the economy - public
sector, private sector, and households.
o This reflects confidence in the future economic prospects of the country.
o The sustained increase in the investment rate is expected to lay the foundation for
investment-led growth in the Indian economy over the next decade.
Agricultural Sector Policies Ensuring Food Security

• Agricultural Sector Contribution:

o Agriculture constitutes 18% of India's Gross Value Added (GVA) in FY24.
o Grew at an average annual rate of 3.7% from FY15 to FY23, compared to 3.4%
from FY05 to FY14.
o Total food grains production for FY23 was 329.7 million tonnes, marking a rise of
14.1 million tonnes.
o India's global dominance in agricultural commodities: largest producer of milk,
pulses, and spices.
o Second-largest producer of various commodities, including fruits, vegetables, tea,
farmed fish, sugarcane, wheat, rice, cotton, and sugar.
o Agricultural exports reached ₹4.2 lakh crore in FY23, surpassing previous records.

• Government Initiatives:
o Consistent increase in Minimum Support Prices (MSPs) for 22 crops.
o Policy initiatives such as PM-KMY, PM-KISAN, and PMFBY provide financial
and income support to farmers.

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 o Digital inclusion and mechanization promoted productivity.
o Launch of e-NAM (National Agriculture Market) in 2016 facilitating online
trading of agricultural commodities.
o Affordable drone technology made available to farmers.
o Efforts to strengthen cooperative movement and creation of Agristack for effective
planning and implementation of schemes.
o Focus on post-harvest infrastructure investment, sustainable agriculture practices,
and promotion of natural farming.

• Food Security Measures:

o Timely and efficient procurement and distribution of food grains.
o Wheat procurement surpasses last year's total, reaching 262 LMT.
o Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) scheme
introduced in 2018.
o Extension of Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for five years
starting from January 1, 2024.
Reform Push to the Indian Industry

• Industrial Growth:
o Industrial growth accelerated to 7.1% per annum from FY15 to FY19 compared to
5.5% in FY10 to FY14.
o Despite a short-lived contraction due to the COVID-19 pandemic, Indian Industry
is likely to record a robust 8% growth per annum during the triennium ending
March 2024.

Government Initiatives:

• Make in India:
▪ Targeted measures under 'Make in India' initiative to bolster domestic
manufacturing.
▪ Production-Linked Incentive (PLI) scheme covering 14 sectors to
incentivize manufacturers.
▪ Over ₹1.07 lakh crore investment, ₹8.7 lakh crore production/sales, and
employment generation of over 7 lakh under PLI scheme.

• Startup India:
▪ 1.14 lakh startups recognized, creating more than 12 lakh jobs.
▪ Open Network for Digital Commerce recorded more than 6.3 million
transactions in November 2023.
▪ Regulatory reforms, including the decriminalization of 3,600 compliances,
improved ease of doing business.

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• MSME Support:
▪ Vibrant and dynamic MSMEs with supportive measures.
▪ Union Budget for FY24 facilitating timely receipt of payments for MSMEs.
▪ Udyam portal and Udyam Assist Platform (UAP) consolidating MSME
information.
▪ PM Vishwakarma, offering support to artisans, attracting 48.8 lakh
enrolments.

• Credit Schemes:
▪ Pradhan Mantri Mudra Yojana disbursed ₹25.98 lakh crore to small and
micro enterprises.
▪ Credit Guarantee Fund Trust for Micro & Small Enterprises
(CGTMSE) limit raised to ₹5 crore.
▪ Emergency Credit Line Guarantee Scheme (ECLGS) provided guarantees
of ₹2.4 lakh crore.

• Logistics and Infrastructure:

o Unified Logistics Interface Platform (ULIP) under the National Logistics Policy
integrated with 35 systems of 8 ministries, with 699 industry players registered.
o Logistics cost in the economy reduced by 0.8 to 0.9 percentage points of GDP
between FY14 and FY22.
o Average turnaround time at major ports decreased from 4.2 days (FY04-FY14) to
2.9 days (FY14-FY22).
o Government's capex push reduced logistics costs, bolstered the construction
industry, and contributed to around 12% per annum growth in construction from
FY22 to FY24.

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 Digital Infrastructure and Delivery of Citizen-Centric Services

• Digital Public Infrastructure (DPI) - India Stack:

o Three interconnected layers: Identity Layer (Aadhaar), Payments Layer (UPI,
Aadhaar Payments Bridge, Aadhaar Enabled Payment Service), and Data Layer
(Account Aggregator).
o Identity Layer (Aadhaar) provided digital identity to every Indian.
o Payments Layer witnessed a surge in cashless payments, especially during the
pandemic.
o Data Layer transformed the authentication ecosystem, reducing e-KYC costs from
₹1000 to ₹5.

• PMJDY and Direct Benefit Transfers (DBT):

o PMJDY utilized India Stack for direct benefit transfers into beneficiaries' bank
accounts.
o PMJDY accounts grew threefold from 14.7 crore in March 2015 to 51.5 crore as of
January 10, 2024.
o DBT mode transferred more than ₹33.6 lakh crore (as of December 2023).

• Financial Inclusion and Fintech Growth:

o 100% FDI in the telecom sector and prohibition of discriminatory data tariffs
increased competition.
o Average monthly data consumption per wireless data subscriber increased almost
300 times to 18.4 GB in June 2023 from 61.7 MB in March 2014.
o India among the fastest-growing fintech markets globally, third-largest after the
USA and the UK.

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• Global Capability Centres (GCCs):
o Sharp increase in business services exports linked to the proliferation of Global
Capability Centres (GCCs) in India.
o GCCs account for more than 1% of India's GDP.
Return of Credit Creation

• Bank Credit Growth:

o Outpaced the growth in deposits.
o Non-food bank credit grew at 15% in FY23, the highest in the last decade.

• Asset Quality Improvement:

o Improvement in asset quality across all Scheduled Commercial Bank (SCB) groups.
o Downward trend in the ratio of GNPAs and Net NPAs relative to total advances.
Signifies a positive shift in asset quality, reducing non-performing assets.

• Global Ranking Improvement:

o India's global ranking in resolving insolvency parameters improved from 136 to 52
in the first three years of IBC implementation.

• Recapitalization Measures:
o Government recapitalization measures helped improve profit margins of public
sector banks (PSBs).
o Corporate profit margins increased due to the resolution of stressed assets, saving
costs on debt servicing.

• Credit Disbursal to MSMEs and Infrastructure Sector:

BLISS POINT STUIDES 24

 o Bank credit to MSMEs registered a CAGR of 14.2% from FY19 to FY24.
o Recent government emphasis on capital expenditure strengthened the credit cycle,
with growing bank credit disbursal to the infrastructure sector.

Evolving Financial Markets to Support the Investment Needs of a Growing

Economy

• India's Equity Market Surge and Digital Revolution:

o Indian equity markets have outshone global counterparts, delivering an impressive
CAGR of approximately 13.5% between January 2014 and December 2023.
o Volatility in 2023, measured by the standard deviation of the BSE Sensex, has
decreased to levels last observed in 2019, reflecting increased stability.
o Adoption of digital technology has significantly enhanced retail investors' access
to financial markets, evidenced by a remarkable 536% growth in demat accounts,
reaching 13.9 crore by December 2023 from March 2014.

• IPO Activity: SME Segment Flourishing:

o Since FY15, a total of 1,050 companies have collectively raised ₹3.9 lakh crore
through IPOs, showcasing the buoyancy in the market.
o Sustained IPO activity has positioned the Indian market as the fifth-largest globally
by market capitalization.
o India's market capitalization to GDP ratio has witnessed a significant improvement,
rising from 79% in 2014 to an impressive 104% by the end of 2022.
o India's robust equity market performance has translated into the second-largest
weightage in the MSCI Emerging Markets index.

BLISS POINT STUIDES 25

 o The Indian corporate bond market has experienced substantial growth, doubling
from ₹43 lakh crore in FY24 to a projected ₹100-120 lakh crore in FY30, according
to CRISIL.

• Initiatives Driving Bond Market Development:

o Introduction of sovereign green bonds and regulatory measures by SEBI for
instruments like InvITs and Municipal Bonds have contributed to the deepening
and widening of the bond market.
o Large corporations listed on exchanges are mandated to fulfill 25% of their
financing needs through the issuance of debt securities, promoting market growth.
o India's financial markets are anticipated to play a pivotal role in financing the
nation's capital investment requirements in the future.
o Access to financial markets is expected to facilitate a broader pool of investors,
allowing for diversified investments and safer savings growth.

Safeguarding Macroeconomic Stability

• Macroeconomic Stability Goals:

o The government and the Reserve Bank of India aim for macroeconomic stability,
which includes strong output growth, price stability, and a robust external account.
o Institutional architecture has been committed to fostering macro stability in the face
of multiple challenges.

• Inflation Targeting:
o The period between FY09 and FY14 saw high average retail inflation, but since
FY16, flexible inflation targeting has been adopted within the band of 4 +/- 2 per
cent under the Monetary Policy Framework Agreement.
o The Price Stabilization Fund (PSF) has been effective in managing price volatility
in agri-horticultural commodities.
o Despite challenges during the Covid-19 pandemic, inflation was kept within the 2
to 6 per cent range, aided by the PSF and improved fiscal and external balances.

• Post-Pandemic Challenges and Response:

o FY22 witnessed an economic revival, but by the end of FY22, global economic
conditions worsened due to geopolitical conflicts and sanctions.
o Elevated global commodity prices, especially crude oil, and supply chain
disruptions posed challenges.
o The government diversified energy supply sources to insulate the economy from
vulnerabilities, contributing to India's growth revival.

• Inflation Trends:

BLISS POINT STUIDES 26

 o Inflationary pressures moderated in FY24, with average retail inflation easing to
5.5 per cent.
o Core inflation reached a 49-month low of 3.8 per cent in December 2023.
o Overall retail inflation is stable and within the notified tolerance band of 2 to 6 per
cent.

• Food Inflation Challenges and Mitigation:

o Global and domestic challenges, including untimely rains and weather-driven
supply chain disruptions, impacted food prices.
o Supply-side initiatives, periodic open market releases, trade policy measures, and
anti-hoarding measures helped keep food inflation at moderate levels, lower than
many large economies.

• Monetary Policy Support:

o Supportive monetary policy by the Reserve Bank of India, including a progressive
increase in the policy repo rate, aimed at aligning inflation with the target while
supporting growth.
o The RBI projected that inflation would average 5.4 per cent in FY24 within the
notified tolerance level.

• Future Outlook:
o With likely improvements in the fiscal balance and external current account balance,
macro vulnerabilities are expected to moderate.
o The government and the RBI have implemented a comprehensive approach,
including inflation targeting, fiscal measures, and supply-side initiatives, to achieve
and maintain macroeconomic stability in India despite various challenges.

BLISS POINT STUIDES 27

 Human Resources: Dovetailing Growth with Capacitating Welfare

A New Approach to Welfare

• Rising Productivity of Social Sector Spending:

o Union government expenditure on social services has increased at a Compound
Annual Growth Rate (CAGR) of 5.9% between FY12 and FY23.
o Capital expenditure on social services has grown by 8.1% CAGR over the same
period, indicating the creation of societal assets.

• Universal Access to Basic Amenities:

o Programs like Ujjwala Yojana, PM-Jan Aarogya Yojana, PM-Jal Jeevan Mission,
and PM-AWAS Yojana focus on universal access to basic amenities.
o This approach builds social infrastructure for the future and empowers individuals
to improve their standard of living.

• Target-Based Budgetary Allocation with Monitoring Framework:

o An Output-Outcome Monitoring Framework for major central sector and centrally
sponsored schemes has been in place since FY20.
o User-friendly dashboards and management information systems (MIS) across
major schemes enhance transparency and accountability.

• Fiscal Efficiency and Minimization of Leakages:

o Direct Benefit Transfer (DBT) scheme and Jan Dhan Yojana-Aadhaar-Mobile
(JAM) trinity enhance fiscal efficiency and minimize leakages.
o 'One Nation One Ration Card' program institutionalizes digital goods in welfare,
allowing seamless portability of ration cards across states.

• Prioritizing Social Enablers:

o Investments in child immunization and sanitation have positive externalities,
benefiting the least privileged and improving long-term health and well-being.

• Affordable Social Security Schemes for Unorganised Sector Workers:

BLISS POINT STUIDES 28

 o Atal Pension Yojana (APY), PM Jeevan Jyoti Yojana (PMJJY), and PM Suraksha
Bima Yojana (PMSBY) provide social security for unorganised sector workers.
o The success of these schemes is reflected in their expanding subscriber base, with
APY having a subscriber base of 6.1 crore as of December 2023.

• Large-Scale Infrastructure Development:

o A significant push towards infrastructure development has a multiplier impact on
employment at the bottom of the pyramid.
o Investments in digital, energy, and transport infrastructure strengthen the link
between growth and development.

• Calibrated Response to Crisis:

o During the Covid-19 crisis, the government opted for a phased response with safety
nets for vulnerable sections.
o The response addressed specific needs, such as ensuring food security, providing
credit for street vendors, and creating employment for returnee migrants, while
allowing different sectors of the economy to recover at different paces.

The Impact of the New Welfare Approach: A Review

• Overall Improvement in Quality of Life:

o The new welfare approach has led to a significant enhancement in the quality of
life in India.
o India's ascent to the 5th largest economy is indicative of the positive impact on the
lives of the common people compared to a decade ago.

• Reduction in Multidimensional Poverty:

o According to a NITI Aayog report, 13.5 crore Indians have escaped
multidimensional poverty between 2015-16 and 2019-21.
o This positive trend is particularly pronounced in rural India and the most backward
areas, reflecting the principle of "Antyodaya."

• Improvements in Basic Amenities:

o The National Family Health Survey data for 2019-21 highlights consistent
progress in access to basic amenities such as electricity, drinking water, sanitation,
and clean fuel.
o These improvements contribute to an overall better standard of living.

BLISS POINT STUIDES 29

• Decline in Out-of-Pocket Health Expenditure:
o National health accounts data reveals a consistent decline in out-of-pocket health
expenditure, decreasing from 62.6% of total health expenditure (THE) in FY15 to
47.1% of THE in FY20.
o This reduction signifies improved access to healthcare without placing a significant
financial burden on individuals.

• Health Indicators Improvement:

o Maternal mortality ratio has seen a decline from 130 per lakh live births in 2014-
16 to 97 per lakh live births in 2018-20, indicating progress in maternal health.
o Other health indicators, such as the decline in maternal mortality, contribute to the
positive impact of welfare initiatives on public health.

BLISS POINT STUIDES 30

• Gender Equality in Higher Education:
o The female Gross Enrollment Ratio (GER) in higher education has surpassed the
male GER since FY18.
o This shift indicates progress towards gender equality in access to higher education,
aligning with the goals of inclusive development.

• Economic Inequality Reduction:

o Fiscal transfers through welfare schemes play a crucial role in lowering economic
inequality, as evidenced by a recent Collection of Essays by the Office of CEA.
o This demonstrates the broader impact of welfare policies on creating a more
equitable society.

• Expansion of Empowering Welfare Initiatives:

o Over the last decade, the scope of "empowering welfare" has expanded
significantly.
o The expansion signifies a comprehensive and inclusive approach to welfare,
addressing diverse needs and demographics.

BLISS POINT STUIDES 31

 Women-Led Development

• Empowerment through Political Representation:

o The women’s reservation Bill (Nari Shakti Vandan Adhiniyam (NSVA) in 2023
aims to enhance women's participation in government, linked to improved
institutions and integrity.
o Constitutionalizing one-third reservation for women in Panchayats in 1991 has
resulted in 46% of elected representatives being women.
o Research indicates that such reservations lead to increased investment in public
goods, especially related to women's concerns like drinking water and public roads.

• Inclusive Growth and Basic Needs:

o Actualizing women-led development requires fulfilling prerequisites of equal
opportunity and basic needs.
o Initiatives have been launched to improve women's quality of life and enable their
productive participation in the workforce.

• Financial Inclusion:
o Access to financial services, exemplified by the success of PM Jan Dhan Yojana,
enhances women's control over household resources.
o The proportion of women with bank accounts has risen from 53% in 2015-16 to
78.6% in 2019-21.

• Self-Help Groups (SHGs) and Economic Empowerment:

o Women-led SHGs positively impact economic, social, and political empowerment,
influencing financial decision-making and livelihood diversification.
o The Deendayal Antyodaya Yojana-National Rural Livelihood Mission (DAY-
NRLM) empowers nearly nine crore women through 83 lakh SHGs.

BLISS POINT STUIDES 32

• Skill Development and Entrepreneurship:
o Female participation in human capital formation is encouraged through initiatives
like Skill India Mission, Start-up and Stand-Up India.
o Over 59 lakh women have been certified under PM Kaushal Vikas Yojana, with
significant loans sanctioned to women entrepreneurs under PM Mudra Yojana.

• Infrastructure Development:
o Initiatives like 'Swachh Bharat Mission,' 'Ujjwala Yojana,' and 'Jal Jeevan
Mission' have transformed lives, reducing the drudgery and care burden on women.

• Housing and Asset Ownership:

o PM AWAS Yojana (Gramin) has led to 26.6% of completed houses solely in the
name of women, enhancing their participation in decision-making.

• Health and Education of the Girl Child:

o Initiatives like "Beti Bachao, Beti Padhao" and Sukanya Samriddhi Yojana focus
on saving, educating, and financial planning for the girl child.
o Increased Gross Enrollment Ratio (GER) of girls in secondary schools signifies
progress.

• Economic Impact and Progress:

o The initiatives have contributed to a rise in the female labor force participation rate
to 37% in 2022-23.
o Positive trends include an improved sex ratio at birth (933 in 2022-23) and a
reduced maternal mortality rate (97/lakh live births in 2018-20).

BLISS POINT STUIDES 33

 Focused on the Long-Term Perspective

• The document highlights the need for sustained and strategic efforts, adopting a comprehensive
societal approach to address persistent challenges in human development. Two key areas of
focus are outlined:

o Malnutrition and Public Health:

▪ Recognizing malnutrition as a barrier to realizing the demographic dividend,
the approach to nutrition has been broadened to include sanitation, clean
drinking water, basic medicines, housing, and a life cycle approach to
malnutrition reduction.
▪ Initiatives like Mission Saksham Anganwadi and Poshan 2.0 prioritize
improved health, wellness, and immunity through micronutrient sufficiency,
moving beyond a focus on calorific sufficiency alone.
▪ Under the POSHAN Abhiyaan, cost-effective strategies such as
technology-based monitoring via POSHAN Tracker, behavioral change,
and program convergence are being implemented.
▪ Positive outcomes are evident, with data from the National Family Health
Survey showing a reduction in stunting from 38.4% to 35.5%, wasting from
21% to 19.3%, and underweight prevalence from 35.8% to 32.1% for
children under five years from 2015-16 to 2019-21.
o Education and Human Capital Development:
▪ Having achieved universal access to elementary education, the focus has
shifted towards enhancing learning outcomes to build a human capital pool
suitable for a developed India@100.

BLISS POINT STUIDES 34

 ▪ The National Education Policy is identified as a silent revolution,
addressing issues such as the impact of Covid-19 on learning, quality
improvement in schools, and reforms in teacher training, community
participation, and pedagogy.
▪ The National Achievement Survey 2021 results highlight the need for
upgrading the quality of education, emphasizing the importance of ongoing
efforts outlined in the National Education Policy.
Employment situation in the Past Decade

• Unemployment Trends and LFPR:

o The unemployment rate in India has significantly decreased from 6 percent in 2017-
18 to 3.2 percent in 2022-23, as per the Periodic Labour Force Surveys (PLFS).
o This positive trend is observed across gender and rural-urban divides.
o The Labor Force Participation Rate (LFPR) has risen from 49.8 percent in 2017-
18 to 57.9 percent in 2022-23, driven by an increase in rural female LFPR.

• Organized Sector Job Market:

o Payroll data for the Employees' Provident Fund Organisation (EPFO) indicates a
consistent year-on-year increase in payroll additions since 2018-19.
o Net payroll additions to EPFO more than tripled from 61 lakh in 2018-19 to 139
lakh in 2022-23.
o Aatmanirbhar Bharat Rojgar Yojana (ABRY) played a significant role in the
swift recovery of the organized sector job market post-pandemic.

• Regular-Wage Jobs and Workforce Growth:

o Despite a decline in the percentage of people with regular wages (from 22.8% in
FY18 to 20.9% in FY23), the absolute number of workers in this category increased
by almost 15 million during the same period.
o This challenges the misconception that a decline in the percentage implies a
reduction in the total number of jobs.

• Gig Economy and Job Creation:

o The gig economy has witnessed significant growth, employing 77 lakh workers in
FY21, according to a NITI Aayog report.
o Affordable internet access and smartphones have facilitated the rise of the gig
economy, particularly in tier-2 and tier-3 cities.
o The gig economy serves as an entry point for job seekers, offering flexibility and
acting as a potential pathway to better-paying jobs.

• Overall Positive Transformation:

BLISS POINT STUIDES 35

 o India has undergone a positive transformation in its employment situation over the
past decade.
o Achievements include formalization, skill development, entrepreneurship, industry
diversification, and inclusive growth.
o Commitment to technological advancement and infrastructure development
positions India as a dynamic and resilient player in the global job market.

• Persistent Challenges:
o Despite positive trends, challenges remain, such as formalizing a growing
workforce and creating jobs in sectors absorbing workers from agriculture.
o Ensuring social security benefits for those in regular wage/salaried employment is
crucial, with 53 percent not eligible for any social security benefit, as per PLFS
2022-23.

• Future Outlook:
o As India navigates the challenges and opportunities of the 21st century, the positive
aspects of its evolving employment scenario bode well for sustained economic
growth and social progress.
o Ongoing commitment to addressing challenges will be essential for continued
positive developments in the employment landscape.

Rising Youth Employment

• Youth Unemployment Trends:

BLISS POINT STUIDES 36

 o Overall Decline: The youth unemployment rate in India has significantly
decreased from 17.8 per cent in 2017-18 to 10 per cent in 2022-23.
o Comparison with Overall Unemployment: There are notable differences, with
the 15-29 age group having a 10 per cent unemployment rate compared to the
overall rate of 3.2 per cent, showcasing a sharp decline in youth unemployment.
o Population Growth vs. Employment Growth: Despite a population increase of
17 million in this age group, the Working Population Ratio (WPR) has risen from
31.4 per cent to 40.1 per cent, signifying an additional 35 million people finding
employment.

• State-Level Impact:
o Leadership of Youth-Populous States: States like Uttar Pradesh, Bihar, and
Madhya Pradesh, with a significant share of the young population, have been at the
forefront of positive changes in youth employment.
o State-wise Decline: Uttar Pradesh, for instance, has seen its youth unemployment
rate drop from 16.7% in 2017-18 to 7% in 2022-23.
o Correlation with LFPR: The decline in youth unemployment is accompanied by
a rise in Youth Labor Force Participation Rate (LFPR) in these states, exemplified
by Uttar Pradesh's increase from 33.7% to 41.4%.

• Impact on Employment Landscape:

o Positive Narrative: Contrary to concerns about a shrinking job market, the data
reflects a positive narrative, showcasing the largest addition to the number of
workers relative to the population in the 15-29 age group.
o Population-Employment Dynamics: The implied narrative challenges the
perception of dwindling job opportunities for the youth, emphasizing a favorable
trend in youth employment over the past decade.

• National Economic Implications:

o Youth as Economic Contributors: The rise in youth employment rates has
broader implications for the economy, with a growing working-age population
contributing positively to economic growth.
o Demographic Transition Success: The shift from a high youth unemployment rate
to a decline and an increase in LFPR indicates success in managing the
demographic transition, aligning with positive economic indicators.

The past decade has witnessed a significant improvement in youth employment in India,
characterized by a decline in the unemployment rate, a rise in LFPR, and positive trends in
populous states, challenging concerns of a diminishing job market for the youth.

BLISS POINT STUIDES 37

 Rising Female Labour Force Participation Rate

The rising female labor force participation rate (FLFPR) in India is a significant trend, and several
factors contribute to this positive shift.

• Data and Statistics:

o FLFPR Decline: In the new millennium, India's FLFPR declined from 34.1% in
1999-00 to 23.3% in 2017-18.
o Recent Rise: However, the trend has reversed in recent years, with FLFPR rising
from 23.3% in 2017-18 to 37.0% in 2022-23, as per the "usual status" concept.
o Urban vs. Rural: While urban FLFPR has also increased, the rural FLFPR has
seen a sharper rise, from 24.6% in 2017-18 to 36.6% in 2022-23.

• Factors Contributing to the Rise:

o Improved Education: While the initial decline in FLFPR coincided with increased
female enrollment in education, this is expected to lead to higher future workforce
participation as young cohorts complete their studies, aligning with Goldin's U-
curve theory.
o Rural Employment Growth: The recent rise in FLFPR is primarily driven by rural
women entering the workforce, with an increase in self-employment and
agricultural work among them.

▪ Contributing Factors:
• Increased agricultural output: This potentially creates more
opportunities for women in agriculture.
• Improved access to basic amenities: Reduced time spent on
household chores might free up women's time for paid work.
• Shifting male workforce: As men move towards non-agricultural
jobs, women might be filling in for them in agricultural activities.

▪ Structural Shift within Rural Female Workforce:

• Increased skilled agricultural labor: The proportion of skilled

female agricultural workers is rising (from 48% in 2018-19 to 59.4%
in 2022-23), indicating a shift towards more productive and
potentially remunerative work.
• Decreased reliance on manual labor: The share of female workers
engaged in physically demanding agricultural tasks is declining
(from 23.4% to 16.6% over the same period), suggesting potential
improvement in working conditions.

BLISS POINT STUIDES 38

• Points for Further Consideration:
o While the rising FLFPR is a positive trend, it's crucial to analyze the quality of these
jobs, their impact on income and bargaining power within households, and the long-
term sustainability of this trend.
o The data suggests a potential feminization of agriculture, which requires further
investigation regarding its implications for gender dynamics within the agricultural
sector.

Overall, the rise in FLFPR, particularly in rural areas, presents a complex picture with both positive
and potential challenges. Further research and analysis are necessary to understand the nuances of
this phenomenon and ensure its sustainable and equitable contribution to India's economic and
social development.

Skill Development and Entrepreneurship

• Government Initiatives: The government of India has recognized the importance of a skilled
workforce in a rapidly changing global economy. In 2014, a Central Ministry was established,
leading to the launch of the National Skill Development Mission and the National Policy on
Skill Development and Entrepreneurship.

• Educational Reforms: The National Education Policy (NEP) 2020 emphasizes vocational
education and skill development, aiming to integrate vocational education with general
education and mainstream it. This is seen as a crucial reform in the country's education system.

• Skill India Mission: Launched in 2015, the Skill India Mission has been instrumental in youth
employment and skill development. The PM Kaushal Vikas Yojana has trained nearly 1.4 crore
candidates since 2015. The recent introduction of the Skill India Digital platform further
supports skill acquisition, education, employment, and entrepreneurship.

• Skilling Progress: The push for mass skilling has yielded positive results, reflected in India's
rising position in WorldSkills Competitions. The employability of final-year and pre-final-year
students has increased from 33.9% in 2014 to 51.3% in 2024, as per the India Skills Report
2023.

• Education-Skill Continuum: The report highlights the need to mainstream skilling into the
education curriculum, as outlined in the National Education Policy. Additionally, there is a call
to upskill a significant portion of the existing workforce in future-relevant skills, considering a
substantial percentage without formal/informal vocational/technical training.

BLISS POINT STUIDES 39

• Opportunities for Improvement: Despite progress, there is room to improve the education-
skill continuum, especially for individuals with ten or more years of schooling. The report
suggests the establishment of finishing schools for employability to tap into the potential of the
youth.

• Future Impact: The government's investment in human capital through skill development
initiatives is expected to have a positive impact on various sectors, contributing to economic
prosperity and social development.

India’s External Sector: Safely Navigating Through Uncertainties

Merchandise Trade Depicted Resilience

• Export Performance:
o India's merchandise exports have shown remarkable growth, exceeding 50% over
the past decade, reaching a record high of USD 451.1 billion in FY23.
o Services exports have also experienced significant growth, with a 120% increase
over the same period, and software services consistently comprising almost half of
the total service exports.

• Trade Balance Improvement:

o Despite geopolitical tensions and weaker global demand affecting merchandise
exports in FY24, India's merchandise trade balance improved significantly. The
trade deficit decreased from USD 189.2 billion in April-November 2022 to USD
166.4 billion in the same period of 2023 due to a decline in imports.

• Diversification Efforts:
o While the principal commodity classification of the Directorate General of
Commercial Intelligence and Statistics (DGCI & S) has remained relatively stable,
there is progressive diversification in India's export basket. There is potential for
further diversification to add more quality and complexity to exports, leveraging
existing capabilities.

• Services Sector Resilience:

o India has established itself as a knowledge-based economy, with software services
playing a crucial role in the service export sector.
o Business services and financial services have witnessed double-digit growth since
FY22, reflecting resilience in the aftermath of the pandemic.

BLISS POINT STUIDES 40

• Policy Measures for Export Promotion:
o The government is actively engaged in efforts to enhance production capacity and
boost exports, with the aim of achieving a target of USD 2 trillion by 2030.
o Deliberate policy measures and trade facilitation initiatives are in place to
encourage export promotion. This includes setting export targets, monitoring, and
course correction.
o Measures such as export credit insurance services, affordable and adequate export
credit for MSME exporters, and encouragement for exploring new markets and
diversifying products competitively are being implemented.

Comfortable Balance on Current Account

The comfortable balance on the current account of India has been attributed to several factors:

o Service Exports and Remittances Growth:

▪ Service exports experienced a Compound Annual Growth Rate (CAGR) of
7.1% from FY12 to FY23.
▪ Remittances grew at a CAGR of 4.5% during the same period.
▪ The combined effect of these growth rates played a crucial role in
maintaining a comfortable current account balance.

o Current Account Deficit Improvement:

▪ The current account deficit (CAD) for the first half (H1) of FY24 decreased
significantly, dropping to USD 17.5 billion from USD 48.8 billion in the
same period of the previous year, reflecting a remarkable 64.1% decline.
▪ This improvement was driven by broad-based enhancements in both
merchandise trade and invisibles (services, transfers, etc.).

o Remittances and High-Skilled Employment Shift:

▪ India is the largest recipient of worker remittances globally, receiving USD
125 billion in 2023.
▪ A structural shift in the employment pattern of Indian migrants towards
high-skilled jobs in high-income countries, such as the United States, the
United Kingdom, and East Asia, contributed to the growth in remittances.
▪ Approximately 36% of India's remittances are attributed to high-skilled
migrants in these top high-income destinations.

o Private Transfer Receipts:

BLISS POINT STUIDES 41

 ▪ Private transfer receipts, mainly representing remittances, reached a record
level of USD 112.5 billion in FY23, with a notable growth of 26.2%
compared to the previous year.
▪ During April-September 2023, private transfer receipts amounted to USD
55.2 billion, indicating a 4.1% increase from the corresponding period of
the previous year.

Capital Account

• Capital Account:
o Capital account witnessed an 88.2% YoY upsurge in H1 of FY24.
o Mainly driven by higher inflows of foreign investment (direct and portfolio) into
India.

• Foreign Portfolio Investments (FPIs):

o Rupee stability and global factors triggered FPIs to increase exposure to Indian
markets by USD 28.8 billion in H1 of FY24.
o Contrastingly, there was a USD 7.8 billion outflow in H1 of FY23.
o Measures like simplification of FPI regulatory regime contributed to this positive
trend.

• Foreign Direct Investment (FDI):

o India remains a preferred destination despite subdued global trends.
o Factors include a young workforce, large middle-class population, and liberal
measures like 100% FDI in most sectors.
o Cumulative FDI inflows were USD 305.3 billion (2.2% of GDP) in FY05-FY14
and USD 596.5 billion (2.5% of GDP) in FY15-FY23.

• Rupee Exchange Rate and External Debt:

o Macro stability and improved external position led to stability in the Indian rupee
during FY24.
o Foreign exchange reserves stood at USD 623.2 billion (covering more than ten
months of imports) as of December 29, 2023.
o External debt was USD 635.3 billion by end-September 2023, considered
comfortable.
o External debt to GDP ratio decreased from 22.4% (March 2013) to 18.6%
(September 2023).

BLISS POINT STUIDES 42

 Way Forward for the External Sector

• Export Diversification: Acknowledge the anticipated decline in the share of exports in GDP
for FY24 due to the global demand slowdown. Focus on diversifying the export portfolio to
mitigate the impact of reduced demand in traditional markets.

• FDI Reforms: Recognize the positive trend in Foreign Direct Investments (FDI) as a result of
continuous reforms in the FDI policy. Continue with policy reforms to attract foreign
investments, aligning them with India's strengths.
• Infrastructure and Logistics Improvement: Strengthen efforts to improve infrastructure and
logistics, as this is identified as a key factor for boosting exports and attracting investments.
Ensure timely implementation of projects to enhance supply chain efficiency.

• FPI Confidence: Acknowledge the increased confidence of Foreign Portfolio Investors (FPIs)
in the prospects of the Indian economy and markets. Sustain this momentum by maintaining
stability in foreign exchange reserves and the external debt position.

• Remittances Growth: Note the expected 8% growth in remittances, reaching USD 135 billion
in 2024. Monitor and leverage this positive trend for economic stability and development.

• Geopolitical Risk Management: Recognize the potential risks from ongoing geopolitical
tensions and the recent surge in shipping costs. Implement strategies to proactively manage and
address these risks to minimize disruptions to trade.

• Energy Cost Management: Acknowledge the potential for triggering inflation, especially in
energy costs, due to the recent surge in shipping costs. Develop strategies to manage and absorb
increased energy costs, such as negotiating long-term contracts or exploring alternative
transportation methods.

Climate Action

India's Climate Action Towards Building Resilience

India's climate action towards building resilience is characterized by a comprehensive and

ambitious approach. The key points include:
o High Resilient Growth and Inclusive Livelihood:
▪ The primary focus is on achieving high resilient growth while ensuring
sustainable and inclusive livelihood options for all.

BLISS POINT STUIDES 43

 ▪ Access to energy is identified as vital for achieving development goals,
including powering industry, enabling education and healthcare, and
enhancing overall social and economic well-being.

o Global Responsibility Despite Low Historical Contribution:

▪ India acknowledges the need for collective action to address climate change
within the framework of UNFCCC and the Paris Agreement.
▪ Despite India's low historical contribution to global carbon stock, the
country recognizes its responsibility and adopts a comprehensive approach
addressing adaptation, resilience building, and mitigation actions.

o Nationally Determined Contributions (NDCs):

▪ India announced its first NDCs in 2015, including targets to reduce
emission intensity, increase non-fossil fuel-based energy capacity, and
create additional carbon sinks through afforestation.
▪ Achievements include surpassing targets for non-fossil fuel-installed
electricity capacity, emission intensity reduction, and carbon sink creation.
▪ The NDCs were updated in 2022 with more ambitious targets,
demonstrating India's commitment to climate action.

o National Action Plan on Climate Change (NAPCC):

▪ The strengthened NAPCC comprises nine missions focusing on specific
areas such as solar energy, energy efficiency, water, sustainable agriculture,
and others.
▪ The National Adaptation Fund for Climate Change (NAFCC) supports
adaptation actions, including projects in agriculture, water, forestry,
livestock, and ecosystem restoration.

o Rapid Expansion of Non-Fossil Fuel Capacity:

▪ India's success in implementing climate targets is attributed to the ambitious
expansion of non-fossil fuel capacity, which has more than doubled in the
last nine years.
▪ Installed solar energy capacity has increased significantly, contributing to
the overall growth in non-fossil fuel capacity.

o Energy Efficiency Measures:

▪ Energy efficiency is recognized as a vital measure to reduce carbon
emissions.
▪ The Perform Achieve and Trade (PAT) scheme has resulted in substantial
energy savings and avoided CO2 emissions.
▪ The introduction of the Carbon Credit Trading Scheme (CCTS) further
incentivizes energy-saving measures.

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o Policy Incentives and Schemes:
▪ Policy incentives, including schemes introduced post-2014, have played a
critical role in boosting renewable energy and improving energy efficiency.
▪ Various schemes, such as solar parks, rooftop solar, and energy
conservation programs, have contributed to the shift to non-fossil fuel
energy.
▪ Major recent schemes include PM-KUSUM, UJALA, and PMUY,
promoting energy efficiency through LPG connections, LED distribution,
and street light installations.

o LiFE Movement:
▪ The LiFE movement, launched in 2021, encourages individual and
community actions for environmental preservation. Initiatives like Green
Credit Program (GCP) and Ecomark incentivize environment-friendly
behaviors.

o Financial Sector Resilience:

▪ Regulatory measures, including sustainability reporting and green finance
frameworks, highlight the integration of climate considerations into the
financial sector.

o Global Initiatives:
▪ India actively participates in international initiatives like International
Solar Alliance (ISA), Coalition for Disaster Resilient Infrastructure
(CDRI), Infrastructure for Resilient Island States or Infrastructure for
Resilient Island States (IRIS), and LeadIT, showcasing leadership in
addressing global climate challenges and fostering international
cooperation.

o Net Zero and Enhanced NDC Goals:

▪ The Indian government places the achievement of developmental priorities
at the core of its efforts towards climate action.
▪ Pursues the goal of reaching net zero by 2070 and enhanced NDC targets
for 2030 through a diverse range of policy, regulatory measures, and
incentives.
▪ Mission LiFE is instrumental in aligning production and consumption
patterns with mindful and deliberate utilization, moving away from
mindless and destructive consumption practices.

o India as a Climate Leader:

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 ▪ India's significant climate actions, resulting in progress towards achieving
its NDC well before 2030, have positioned the country as a climate leader.
▪ India is recognized as the only G20 nation in alignment with limiting global
warming to 2°C compared to its fair share contribution to climate action,
showcasing its commitment to addressing climate change on a global scale.

Outlook

• Economic Growth and Reforms:

o Over the past ten years, India has made significant strides in economic growth,
moving from the 10th largest economy to the 5th largest, with a GDP of USD 3.7
trillion (estimated FY24).
o The journey has been marked by substantive and incremental reforms that have
contributed to economic progress and resilience.
o The government anticipates becoming the third-largest economy in the world in the
next three years, with a GDP of USD 5 trillion.

• Reforms for Future Growth:

o Continued reforms are expected to help India achieve its goal of becoming a
'developed country' by 2047.
o Full participation of state governments is crucial, and reforms should extend to
governance at the district, block, and village levels, with a focus on citizen-friendly
and small business-friendly measures.
o Sustained growth in various sectors, such as health, education, land, and labor, is
emphasized, with active involvement from the states.

• Factors Contributing to Growth:

o Domestic demand, driven by private consumption and investment, has led to a 7
percent plus growth rate in the last three years.
o Investments in physical and digital infrastructure, as well as measures to boost
manufacturing, have strengthened the supply side of the economy.

• Potential for Accelerated Growth:

o The GDP growth rate has the potential to rise above 7 percent by 2030, supported
by factors such as rapid infrastructure development, strengthened balance sheets,
digital infrastructure expansion, technological progress, and favorable investment
climate.

• Structural Reforms and Global Context:

o The adoption of GST has unified domestic markets, incentivizing production on a
larger scale and reducing logistics costs.

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 o The credibility of the RBI in controlling inflation contributes to a stable interest
rate environment.
o Despite a sluggish global economic backdrop, the Indian economy has
demonstrated internal strengths, with a compounded annual growth rate of 7.4
percent between 2014 and 2019.

• Future Challenges and Reforms:

o Geopolitical conflicts pose a potential risk to growth.
o Priority areas for future reforms include skilling, learning outcomes, health, energy
security, reduction in compliance burden for MSMEs, and gender balancing in the
labor force.

• Aspirations for the Future:

o Under reasonable assumptions regarding inflation differentials and the exchange
rate, India aims to become a USD 7 trillion economy by 2030, reflecting the
aspiration to improve the quality of life and standard of living for its people.

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