Economic Survey 2024: Union Finance Minister Unveils Report
Union Finance Minister Nirmala Sitharaman presented the Economic Survey 2024 to Parliament on Monday, July 23, ahead of the Union Budget 2024 announcement. The survey destacaed significant progress in stabilizing inflation in India.
Core Inflation at 4-Year Low
The survey attributed the decline in retail inflation in fiscal year 24-25 to a decrease in core inflation across both goods and services categories. Core services inflation reached a nine-year low, while core goods inflation fell to its lowest point in four years. The improved supply of raw materials to industries contributed to a reduction in inflation for core consumer durables, reversing a trend of rising inflation from FY20 to FY23.
Central Bank Interventions
The Reserve Bank of India (RBI) played a crucial role in curbing inflation by incrementally raising the repo rate by 250 basis points starting in May 2022. This resulted in a decline of approximately 4 percentage points in core inflation between April 2022 and June 2024.
Government Policy Measures
The survey praised the central government for implementing measures to keep retail fuel inflation under control, despite global energy price volatility. These initiatives included reducing prices for LPG, petrol, and diesel. The government’s strategic policy decisions helped navigate global uncertainties and ensure price stability.
Challenges in Agriculture
Despite these gains, the survey recognized the challenges posed by adverse weather conditions and other factors in India’s agriculture sector. Extreme weather events, depleted reservoirs, and crop damage contributed to higher food inflation rates of 6.6% in FY23 and 7.5% in FY24. The survey highlighted government efforts to mitigate these challenges, including dynamic stock management and subsidized provision of essential food items.
Rural vs. Urban Inflation
The survey noted the widening gap between rural and urban inflation in some states. This disparity is attributed to the higher share of food items in rural consumption baskets and greater inter-state variation in food prices in rural areas.
Positive Outlook
The RBI and IMF project a further decline in inflation to 4.5% in FY25 and 4.1% in FY26, assuming normal monsoon and no external shocks. The World Bank anticipates a reduction in global commodity prices, which could further ease domestic inflation.
Long-Term Stability
The survey emphasized the importance of a forward-looking approach to ensure long-term price stability. It suggested improvements in storage and processing facilities for fruits and vegetables, enhanced price monitoring, and increased domestic production of essential food items to mitigate seasonal price spikes.
