Economic Survey 2024-25: Notes & Mindmap

Economic Survey 2024-25: Notes & Mindmap upsc

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The Economic Survey is the flagship annual document of the Ministry of Finance, presenting a detailed analysis of India’s economic performance, policy initiatives, and future outlook. It serves as a prelude to the Union Budget, offering insights into GDP growth, inflation, fiscal trends, employment, trade, and sectoral progress. The survey also evaluates global economic conditions, investment patterns, and structural reforms shaping India’s economy. By highlighting challenges and opportunities, it provides a data-driven roadmap for policy formulation and governance, guiding stakeholders, investors, and policymakers in fostering inclusive and sustainable economic growth.

The Economic Survey 2024-25 provides a comprehensive assessment of India’s economic performance, policy reforms, and growth outlook. It highlights macroeconomic stability, fiscal consolidation, investment trends, and social sector progress. The survey examines global economic shifts, inflationary trends, employment patterns, and climate resilience while outlining India’s growth trajectory amid geopolitical challenges. Key sectors, including infrastructure, agriculture, industry, and services, are analyzed for their contribution to GDP. With a focus on digital transformation, financial inclusion, and sustainable development, the survey lays the foundation for policymaking and economic planning ahead of the Union Budget 2025.

Contents

Introduction

The global economy in 2024 exhibited steady yet uneven growth, influenced by geopolitical tensions, trade disruptions, and evolving monetary policies. While inflationary pressures eased in most advanced economies, certain sectors, especially services, continued to experience persistent inflation. India’s economy remained resilient, with real GDP estimated to grow by 6.4% in FY25, driven by robust agricultural and services sector performance. However, challenges such as global demand fluctuations, domestic inflation volatility, and policy uncertainties persist. This chapter provides a comprehensive analysis of the global and Indian economic landscape, including fiscal discipline, financial sector trends, inflationary pressures, employment growth, and external trade dynamics.

Global Economic Scenario

Growth Trends and Regional Disparities

  • Global economic growth projected at 3.2% in 2024 and 3.3% in 2025.
  • Strong services sector performance, while manufacturing lags due to weak demand in Europe and Asia.
  • US Federal Funds Rate (FFR) uncertainty influencing global markets.
  • Inflation control efforts leading to varying monetary policies across economies.

Inflation and Commodity Prices

  • Inflationary pressures have eased, though services inflation remains a concern.
  • Commodity prices stabilized but remain at risk of synchronized price increases.
  • Global shipping disruptions and energy price fluctuations impacting trade.

Financial Market Trends

  • Sovereign bond yields in advanced economies fluctuating due to inflation uncertainty.
  • Emerging markets, including India, witnessing capital inflows and currency fluctuations.

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Domestic Economic Trends

Macroeconomic Performance

  • India’s GDP projected to grow at 6.4% in FY25, supported by agriculture and services.
  • Rural demand strengthened by record Kharif production and improved agricultural conditions.
  • Manufacturing sector facing headwinds from weak global demand and seasonal domestic factors.
  • Stable private consumption reflecting strong domestic demand.

Fiscal and Monetary Stability

  • Fiscal discipline maintained with controlled deficits and strategic expenditure management.
  • Stable external sector with strong remittance inflows and services trade surplus.
  • RBI adopting a cautious stance on monetary policy in response to inflation trends.

Inflation and Price Trends

Consumer Price Inflation

  • Retail inflation moderated from 5.4% in FY24 to 4.9% in FY25.
  • Core inflation declined, but food inflation remains volatile due to supply chain disruptions and climatic factors.
  • Pulses and vegetable prices contributing to inflation spikes.

External Trade and Balance of Payments

  • Merchandise exports grew by 1.6% YoY, with non-oil, non-gold exports rising 9.1%.
  • Import growth of 5.2%, driven by higher non-oil, non-gold purchases and increased gold demand.
  • India’s current account deficit (CAD) remains manageable at 1.2% of GDP.

Banking and Financial Sector

Banking Stability and Credit Growth

  • Gross Non-Performing Assets (NPA) at a 12-year low of 2.6%.
  • Capital adequacy ratio for scheduled commercial banks (SCBs) at 16.7%.
  • Credit growth driven by housing and personal loans, with moderate industrial credit growth.

Financial Market Developments

  • Foreign portfolio investments (FPI) inflows declined to USD 10.6 billion in April–December 2024.
  • India’s forex reserves peaked at USD 704.9 billion before moderating to USD 634.6 billion in January 2025.
  • Government securities included in JP Morgan EM Bond Index, boosting debt market participation.

Employment and Labour Market Trends

Labour Force and Employment Trends

  • Unemployment rate declined from 6% in 2017-18 to 3.2% in 2023-24.
  • Labour force participation rate (LFPR) and worker-to-population ratio (WPR) improved.
  • Formal sector employment expanded, with EPFO net additions doubling from 61 lakh in FY19 to 131 lakh in FY24.

Technological Disruptions and AI Impact

  • AI adoption reshaping India’s labour market with opportunities for productivity gains.
  • Need for workforce upskilling to align with AI-driven transformations.
  • Government initiatives enhancing job market formalization and social security provisions.

Future Outlook and Policy Recommendations

Growth Prospects and Risks

  • Economic growth projected between 6.3% and 6.8% in FY26.
  • Geopolitical risks, trade policy shifts, and commodity price fluctuations pose challenges.
  • Reforms in infrastructure, skill development, and regulatory frameworks necessary to sustain growth.

Strategic Policy Measures

  • Strengthening grassroots structural reforms to enhance global competitiveness.
  • Encouraging private sector investments through policy stability and deregulation.
  • Enhancing trade diversification to reduce dependence on a few key export markets.
  • Adopting a balanced monetary policy approach to mitigate inflationary risks while supporting growth.

Conclusion

India’s economic resilience amid global uncertainties reflects strong macroeconomic fundamentals, strategic fiscal management, and steady policy execution. While challenges such as inflation volatility, external trade uncertainties, and employment shifts remain, prudent policy measures can mitigate risks and sustain long-term growth. Emphasizing investment in technology, infrastructure, and skill development will be crucial for maintaining economic momentum and enhancing India’s global competitiveness.

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Introduction

The external sector plays a crucial role in a country’s economic growth and stability, encompassing trade, foreign investment, external debt, foreign exchange reserves, and global market integration. India’s external sector has shown resilience amid global headwinds such as trade protectionism, geopolitical risks, supply chain disruptions, and climate-related uncertainties.

The Indian economy, supported by strong fundamentals and policy measures, has witnessed steady export growth and rising foreign direct investment (FDI). However, challenges such as trade imbalances, capital outflows, and evolving global trade dynamics require continuous policy recalibration.

This chapter provides an in-depth analysis of India’s external sector, covering global trade trends, India’s trade performance, services exports, balance of payments, foreign exchange reserves, and external debt. It also examines the impact of global uncertainties, protectionist measures, and technological advancements on India’s trade and investment policies.

Global Trade Dynamics

  • Geopolitical tensions and economic uncertainties have created volatility in global trade.
  • The Global Economic Policy Uncertainty (GEPU) Index remains high due to factors like trade tensions, monetary policy shifts, and climate-related disruptions.
  • The Trade Policy Uncertainty (TPU) Index has increased since late 2023, reflecting tariff changes and protectionist measures by major economies.
  • The Geopolitical Risk (GPR) Index has surged due to conflicts in key trade routes like the Red Sea and the Strait of Hormuz.

Global Trade Performance in 2024

  • Total global trade is projected to reach USD 33 trillion in 2024, with services trade growing by 7% year-on-year.
  • Merchandise trade, however, remains below the 2022 peak, growing at 2% annually due to supply chain disruptions and inflationary pressures.
  • Developed economies witnessed a trade resurgence, while East Asian trade stagnated due to reduced demand for consumer electronics and industrial goods.

Protectionism and Non-Tariff Measures (NTMs)

  • Tariffs have declined globally, but non-tariff measures (NTMs) have increased significantly.
  • Technical barriers to trade (TBTs) impact 31.6% of global products, covering 67.1% of world trade.
  • Climate-related NTMs, such as the Carbon Border Adjustment Mechanism (CBAM), are reshaping global trade by imposing stringent environmental compliance measures.

India’s Trade Performance in FY25

  • Total exports (merchandise + services) reached USD 602.6 billion in April-December 2024, growing at 6% year-on-year.
  • Total imports increased by 6.9%, reaching USD 682.2 billion, reflecting strong domestic demand.
  • The overall trade deficit widened to USD 79.5 billion compared to USD 69.7 billion in the previous year.

Sectoral Performance of Merchandise Exports

  • Engineering goods exports grew by 9.9%, driven by demand for automobile components and industrial machinery.
  • Pharmaceutical exports rose by 6.4%, with increased shipments to Europe and Africa.
  • Electronics exports surged by 28.6%, benefiting from the Production-Linked Incentive (PLI) scheme.
  • Textile exports rebounded by 7.6%, driven by man-made fiber (MMF) products.

Imports and Trade Deficit

  • Non-oil, non-gold imports increased by 7.1%, reflecting a rise in capital goods and machinery imports.
  • Gold imports rose due to higher global prices, impacting the current account balance.
  • The merchandise trade deficit widened to USD 210.8 billion, necessitating measures to boost export competitiveness.

India’s Services Trade and E-Commerce Exports

Growth in Services Exports

  • India’s services exports grew by 11.6%, contributing USD 131.3 billion in net receipts.
  • IT and business services remain the key drivers, with India capturing 10.2% of global IT service exports.
  • Travel and transport services witnessed a slower recovery, reflecting global economic uncertainty.

E-Commerce Exports

  • India’s B2C (Business-to-Consumer) e-commerce market is projected to grow to USD 150 billion by 2026.
  • Cross-border e-commerce exports could reach USD 200-300 billion by 2030, driven by MSME (Micro, Small & Medium Enterprises) participation.
  • Government initiatives like the E-Commerce Export Hub (ECEH) and Niryat Bandhu Scheme are facilitating online exports.

Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI)

  • Gross FDI inflows showed a revival in FY25, but net FDI declined due to increased repatriation.
  • Top FDI sectors: IT, renewable energy, financial services, and pharmaceuticals.
  • Leading sources of FDI: Singapore, USA, UAE, and the Netherlands.

Foreign Portfolio Investments (FPI)

  • FPI inflows remained volatile, impacted by global interest rate trends and geopolitical risks.
  • Domestic equity markets saw net positive inflows, reflecting investor confidence in India’s growth story.

India’s Balance of Payments (BoP) and Foreign Exchange Reserves

  • The current account deficit (CAD) widened due to trade imbalances, but remained manageable at 1.6% of GDP.
  • The capital account showed resilience, supported by stable FDI inflows and remittances.
  • Net remittances reached USD 112 billion, a key support for external balances.

Foreign Exchange Reserves and Exchange Rate Movements

  • India’s foreign exchange reserves stood at USD 640.3 billion in December 2024, covering 90% of external debt.
  • The Indian rupee remained stable, supported by RBI interventions and strong macroeconomic fundamentals.

India’s External Debt and Risk Management

India’s External Debt Position

  • Total external debt stood at USD 711.8 billion as of September 2024.
  • Short-term debt accounted for 18.6% of total external liabilities, ensuring manageable rollover risks.
  • Debt service ratio remained stable at 5.4%, indicating India’s strong repayment capacity.

Risk Management Strategies

  • Prudent external borrowing policies have helped India maintain a comfortable debt profile.
  • The RBI’s forex reserves provide a strong buffer, reducing the risks of external shocks.

Conclusion

India’s external sector has demonstrated resilience and adaptability amid global uncertainties. Robust exports, stable FDI inflows, and strong foreign exchange reserves have provided a cushion against external shocks. However, challenges such as rising trade imbalances, protectionist policies, and volatile capital flows require continued policy vigilance.

Going forward, India must diversify its export basket, enhance trade competitiveness, and strengthen regional trade partnerships to sustain its global trade momentum. Policy measures should focus on reducing logistics costs, improving ease of doing business, and leveraging digital trade opportunities to boost India’s external sector performance in the coming years.

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Introduction

India is at a crucial juncture in its economic development, with aspirations to become a USD 5 trillion economy by FY28 and USD 6.3 trillion by FY30. The path to achieving these ambitious goals depends on sustained high growth rates, economic reforms, deregulation, and enhanced economic freedom for businesses and individuals.

The global economic landscape has shifted dramatically in recent years. Geo-economic fragmentation, protectionist policies, disruptions in global supply chains, climate transition challenges, and the rise of China as a manufacturing giant are reshaping international trade and investment patterns. While India has witnessed significant structural reforms over the past decade—including the Goods and Services Tax (GST), Insolvency and Bankruptcy Code (IBC), and digital financial inclusion initiatives—there is an urgent need to address regulatory bottlenecks that hinder business growth and investment.

This chapter provides a comprehensive analysis of India’s medium-term economic outlook, focusing on:

  • Global and domestic growth projections
  • The impact of geo-economic fragmentation on India
  • China’s manufacturing dominance and India’s energy security
  • The role of deregulation in promoting economic growth and competitiveness
  • Policy recommendations for unlocking India’s full economic potential

By understanding these key factors, India can strengthen its domestic growth levers, foster entrepreneurship, and create a regulatory environment that supports long-term prosperity.

India’s Medium-Term Economic Outlook: Growth Projections and Challenges

Economic Growth Prospects

  • India’s nominal GDP grew at an average rate of 8.9% (USD terms) from FY94 to FY24.
  • IMF’s World Economic Outlook (WEO) projects India’s economy to expand at a rate of 10.2% per year (USD terms) from FY25 to FY30.
  • The exchange rate (INR/USD) is expected to depreciate by only 0.5% annually, much lower than the 3.3% depreciation seen in the past three decades.
  • The current account deficit (CAD) is projected to remain stable at 2.2% of GDP by FY30.

Key Domestic Growth Drivers

  • Investment Rate: Needs to increase from 31% to 35% of GDP to sustain long-term growth.
  • Manufacturing Expansion: Focus on Production-Linked Incentive (PLI) schemes and MSME (Micro, Small & Medium Enterprises) growth.
  • Job Creation: India must generate 7.85 million new jobs annually until 2030 to meet workforce demand.
  • Digital Transformation: The India Stack (Aadhaar, UPI, DBT) and digital public infrastructure are boosting financial inclusion.

Geo-Economic Fragmentation: A Shift from Globalization to Protectionism

What is Geo-Economic Fragmentation?

  • Geo-economic fragmentation (GEF) is the reversal of global economic integration due to strategic, trade, and security considerations.
  • Over the last 40 years, the global economy tripled in size, lifting 1.3 billion people out of extreme poverty. However, protectionist policies threaten to reverse these gains.
  • The World Trade Organization (WTO) reports that trade-restrictive measures covered USD 887.7 billion in trade (FY24), compared to just USD 337.1 billion in the previous year.

Impact on India

  • Trade barriers, tariffs, and export restrictions in developed economies are slowing India’s export growth.
  • FDI (Foreign Direct Investment) flows are becoming more regionally concentrated, impacting emerging markets.
  • Supply chain disruptions in semiconductor and critical mineral industries are affecting India’s manufacturing sector.

Strategic Policy Response

  • Strengthening regional trade agreements (RTAs) with ASEAN, Africa, and Latin America.
  • Building resilient supply chains through domestic manufacturing initiatives.
  • Enhancing foreign investment policies to attract capital despite global uncertainties.

China’s Manufacturing Dominance and Its Implications for India

The Rise of China as a Manufacturing Powerhouse

  • China accounts for 45% of global manufacturing output, up from just 6% in 2000.
  • China has become the world’s largest producer of automobiles, solar panels, batteries, and rare earth minerals.
  • 80% of the world’s lithium-ion battery manufacturing capacity is in China.

Challenges for India

  • China’s dominance in renewable energy manufacturing poses challenges for India’s energy transition.
  • Indian MSMEs struggle to compete with Chinese firms in terms of cost and efficiency.
  • Dependence on Chinese imports for semiconductors, solar panels, and electric vehicles raises national security concerns.

Policy Measures to Counter China’s Influence

  • Boosting domestic manufacturing under PLI schemes (electronics, EVs, solar equipment).
  • Investing in rare earth mineral processing to reduce import dependence.
  • Developing alternative trade partnerships to diversify supply sources.

Climate Transition and Energy Security: The Road Ahead for India

India’s Renewable Energy Targets

  • India aims to install 500 GW of renewable energy capacity by 2030.
  • The share of solar and wind energy in power generation is expected to increase from 25% (2024) to 50% (2030).

Challenges in the Green Energy Transition

  • Dependence on China for 75% of lithium-ion battery imports.
  • High costs and technological barriers in domestic solar panel production.
  • Investment needs of USD 546 billion for clean energy transition.

Strategic Policy Recommendations

  • Strengthening battery recycling and rare earth mineral processing industries.
  • Expanding R&D in advanced battery technologies (Sodium-ion, Solid-State Batteries).
  • Partnering with like-minded nations (Japan, EU, USA) to develop alternative supply chains.

Deregulation and Economic Freedom: A Catalyst for Growth

The Burden of Regulatory Compliance

  • Excessive regulations hinder MSME growth, job creation, and investment.
  • Factory regulations force small businesses to remain small, limiting employment growth.
  • Complex land and building laws increase compliance costs for entrepreneurs.

The Need for Deregulation

  • Reducing compliance burdens for businesses.
  • Streamlining licensing, land acquisition, and taxation procedures.
  • Enhancing private sector participation in regulatory decision-making.

Global Examples of Successful Deregulation

  • United States: The “One-In, Two-Out” rule ensures that for every new regulation, two existing regulations are eliminated.
  • United Kingdom: The Better Regulation Framework reduces compliance burdens for businesses.
  • New Zealand: Established a Ministry of Regulation to systematically repeal outdated laws.

Future Economic Prospects and Policy Recommendations

Key Growth Strategies for India

  1. Accelerating Domestic Investments
    • Increasing public and private capital expenditure in infrastructure and manufacturing.
    • Strengthening MSME sector growth through financial support and skill development.
  2. Enhancing Trade and Investment Policies
    • Strengthening trade agreements with emerging markets.
    • Incentivizing foreign direct investment (FDI) in high-tech industries.
  3. Deepening Financial Reforms
    • Expanding digital lending for MSMEs.
    • Enhancing financial inclusion through digital banking initiatives.
  4. Boosting Innovation and Technological Development
    • Increasing R&D spending from 0.7% to 2% of GDP.
    • Encouraging AI, robotics, and biotechnology advancements.

Conclusion

India’s medium-term economic outlook presents immense growth opportunities but also significant challenges. Geo-economic fragmentation, climate transition, and China’s economic influence require a strong domestic policy response. Deregulation and economic freedom are crucial to unlocking India’s full potential.

By reducing regulatory burdens, enhancing trade and investment policies, and boosting domestic manufacturing, India can sustain 8%+ GDP growth and achieve its vision of becoming a USD 6.3 trillion economy by FY30.

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Introduction

The global manufacturing landscape has undergone significant transformations in recent years, driven by geopolitical tensions, aggressive industrial policies, supply chain disruptions, and evolving trade regulations. India has emerged as one of the most dynamic economies in this space, gaining a larger share of global manufacturing while strengthening domestic industry.

Key industries such as steel, cement, chemicals, petrochemicals, electronics, and pharmaceuticals have played a critical role in stabilizing industrial growth, while consumer-driven sectors such as automobiles and textiles have contributed to expansion. However, export demand volatility, domestic regulatory challenges, and global economic uncertainty continue to pose risks to India’s industrial sector.

This chapter explores India’s industrial landscape, covering:

  • Global trends in manufacturing and India’s position
  • Recent developments in the industrial sector
  • Performance of core industrial sectors
  • Growth of capital and consumer goods industries
  • The role of Research & Development (R&D) and innovation
  • State-wise analysis of industrialization and business reforms

India’s ambition of becoming a global manufacturing powerhouse requires coordinated efforts between the government, private sector, R&D institutions, and regulatory bodies. The way forward demands business deregulation, enhanced R&D investments, and technology-driven industrialization.

1. India’s Position in Global Manufacturing

1.1 Global Manufacturing Trends

  • High-income countries have lost their manufacturing dominance over the last decade, with China and emerging economies gaining ground.
  • India’s share in global manufacturing stands at 2.8%, significantly lower than China’s 28.8% share.
  • The International Monetary Fund (IMF) predicts further manufacturing shifts toward India and other emerging economies, driven by supply chain diversification.

Challenges to Global Manufacturing

  • Persistent geopolitical tensions (US-China trade war, EU regulations).
  • Supply chain disruptions due to extreme weather, pandemics, and logistics constraints.
  • Rising industrial and trade policy protectionism affecting export competitiveness.
  • Shift in global consumption patterns toward services over manufactured goods.

2. Industrial Growth Trends in India

2.1 Industrial Performance in FY25

  • India’s industrial sector grew by 6.2% in FY25, higher than the five-year average.
  • Growth was driven by electricity, construction, and consumer goods demand.
  • Challenges included export slowdowns, monsoon disruptions, and global economic uncertainty.

Quarterly Slowdown in Industrial Growth

  • Q2 FY25 industrial growth slowed to 3.6% due to:
    • Declining exports in key manufacturing sectors.
    • Extreme monsoon conditions affecting mining and construction.
    • Shift in festival season timing, impacting consumer spending.

Optimism for Future Growth

  • Purchasing Managers’ Index (PMI) for manufacturing remained above 56, signaling business confidence.
  • Business Expectation Index (BEI) showed rising optimism about industrial expansion.

3. Core Industrial Sectors

3.1 Cement Industry

  • India is the world’s second-largest cement producer, with an installed capacity of 639 million tonnes.
  • Production in FY24 was 427 million tonnes, concentrated in Rajasthan, Andhra Pradesh, Telangana, and Karnataka.
  • Government infrastructure projects (highways, housing, rural development) drive demand.
  • Per capita cement consumption is 290 kg, below the global average of 540 kg.

3.2 Steel Industry

  • India’s crude steel production grew by 3.3% in FY25, driven by infrastructure investments.
  • Construction and infrastructure accounted for 68% of steel consumption.
  • Despite high domestic demand, India remained a net importer of steel, affected by global price fluctuations.

3.3 Chemical and Petrochemical Industry

  • India is a net importer of chemicals, with 45% dependence on petrochemical intermediates.
  • Production reached 30 million metric tonnes in FY24, with demand expected to rise.
  • New PLI (Production-Linked Incentive) schemes aim to enhance domestic production.

4. Capital and Consumer Goods Industry

4.1 Capital Goods Sector

  • Growth in capital goods production remains volatile, with high reliance on imports.
  • Phase II of the Competitiveness Scheme for Capital Goods aims to enhance domestic manufacturing.
  • Smart Advanced Manufacturing and Rapid Transformation Hub (SAMARTH) supports automation and Industry 4.0 adoption.

4.2 Automobile Industry

  • Domestic automobile sales grew by 12.5% in FY24.
  • The government extended the PLI scheme to enhance electric vehicle production.
  • Passenger vehicles and two-wheelers showed strong demand, while commercial vehicle growth remained moderate.

4.3 Electronics Industry

  • India’s electronics production grew at a CAGR of 17.5% from FY15 to FY24.
  • Mobile phone exports reached ₹88,726 crore in FY23, up from zero in FY16.
  • 99% of smartphones sold in India are domestically produced.
  • PLI schemes have boosted component manufacturing, reducing import dependency.

4.4 Textile Industry

  • Textiles contribute 11% to India’s manufacturing Gross Value Added (GVA).
  • India is the second-largest producer of cotton and silk.
  • Textile exports stood at USD 35.87 billion in FY24, with growth in technical textiles.

4.5 Pharmaceutical Industry

  • India is the world’s third-largest pharmaceutical producer by volume.
  • Annual pharmaceutical turnover reached ₹4.17 lakh crore in FY24.
  • PLI schemes focus on reducing import dependence on Active Pharmaceutical Ingredients (APIs).
  • India’s first indigenously developed CAR-T cell therapy was approved in 2023.

5. Research and Development (R&D) and Innovation

5.1 Intellectual Property Growth

  • Patent filings in India have doubled since 2014.
  • India ranks 6th globally in patent applications.
  • Trademark and copyright filings have also increased significantly.

5.2 Challenges in R&D Spending

  • India’s R&D spending is only 0.64% of GDP, compared to China’s 2.1% and the USA’s 2.8%.
  • Private sector contribution to R&D is low, with pharmaceuticals and IT leading.
  • Government incentives such as tax breaks and research credits need expansion.

6. State-Wise Industrialization and Business Reforms

6.1 Variations in Industrial Growth

  • Western states (Gujarat, Maharashtra) and southern states (Tamil Nadu, Karnataka) account for 43% of India’s industrial GVA.
  • Northeastern states contribute only 0.7% to total industrial output.
  • States with strong business reforms show higher industrial growth.

6.2 Business Reform Action Plan (BRAP)

  • States ranked in four categories: Top Achievers, Achievers, Aspirers, and Emerging Business Ecosystems.
  • Ease of Doing Business rankings correlate with industrial success.
  • Tamil Nadu’s footwear and leather manufacturing success showcases the impact of targeted industrial policies.

Conclusion and Future Outlook

India’s industrial sector is poised for long-term growth, but challenges remain in export competitiveness, R&D investment, and business regulatory hurdles. The focus must be on deregulation, skilling, and infrastructure improvements to drive manufacturing expansion.

Key Policy Priorities

  1. Expand R&D spending to 1.5% of GDP and enhance private sector participation.
  2. Strengthen PLI schemes for capital goods and electronics to reduce import reliance.
  3. Enhance state-level business reforms to attract investments.
  4. Develop logistics and industrial corridors for seamless supply chain integration.
  5. Focus on sustainability in cement, steel, and chemical industries.

India’s journey toward becoming a global manufacturing leader depends on long-term policy commitment and collaboration across stakeholders.

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Introduction

India’s agricultural sector has been the backbone of its economy, providing employment, food security, and export revenues. With 16% of the Gross Domestic Product (GDP) contribution and 46.1% of the population dependent on it, agriculture remains a critical sector despite its declining share in the economy. Over the years, government initiatives, technological advancements, and market reforms have helped Indian agriculture evolve from a subsistence-based system to a more diversified and market-oriented sector.

However, climate variability, soil degradation, water scarcity, low productivity, and market inefficiencies pose significant challenges. The sector has demonstrated resilience with an average growth rate of 5% from FY17 to FY23, but it requires further transformation to ensure sustainable growth, increased farmer incomes, and global competitiveness.

This chapter covers:

  • Agricultural Growth Trends
  • Crop Production and Diversification
  • Climate Change and Irrigation Challenges
  • Agriculture Finance and Credit
  • Technological Interventions in Farming
  • Food Processing and Supply Chain Efficiency
  • Policy Recommendations for the Future

The Government of India’s focus on modernization, infrastructure investment, and digital transformation can further strengthen agricultural resilience and productivity, ensuring food security for 1.4 billion Indians while positioning India as a global agricultural powerhouse.

1. Agricultural Growth Trends and Economic Contribution

1.1 Growth Performance of Agriculture

  • Agriculture and allied activities contributed 16% to India’s GDP in FY24.
  • Growth rate in Q2 FY25 was 3.5%, recovering from 0.4%–2% in the previous four quarters.
  • Agricultural income grew at 5.23% annually over the past decade, compared to 6.24% for non-agriculture sectors.
  • Kharif foodgrain production in 2024 reached 1647.05 Lakh Metric Tonnes (LMT), an increase of 89.37 LMT from the previous year.

1.2 State-Wise Agricultural Growth

  • Andhra Pradesh (8.8% CAGR), Madhya Pradesh (6.3%), and Tamil Nadu (4.8%) have led agricultural growth.
  • These states have diversified into high-yield crops like jowar, moong, and maize.
  • Inter-state yield variation highlights the need for productivity improvements and agricultural infrastructure investments.

2. Crop Production and Diversification

2.1 Performance of Major Crop Segments

  • India is the world’s second-largest cereal producer (11.6% of global output).
  • Crop yields remain below global averages, highlighting the need for productivity enhancement.
  • Crop diversification is shifting towards horticulture, livestock, and fisheries due to higher economic returns.

2.2 Floriculture: India’s Rising Export Sector

  • Floriculture exports reached ₹717.83 crore (USD 86.63 million) in FY24.
  • Key export markets: USA, Netherlands, UAE, UK, Canada, Malaysia.
  • Maharashtra, Karnataka, Tamil Nadu, and Madhya Pradesh are leading floriculture hubs.

2.3 Oilseeds and Pulses: Addressing Import Dependence

  • Oilseeds’ slow growth (1.9% CAGR) is concerning, given India’s dependence on edible oil imports.
  • Higher Minimum Support Prices (MSP) for pulses and oilseeds aim to incentivize domestic production.
  • Nutri-cereals (millets) received a 77% MSP hike to encourage sustainable farming.

3. Climate Change and Irrigation Challenges

3.1 Rainfall Variability and Agricultural Risks

  • 55% of India’s net sown area is rain-fed, making it highly vulnerable to climate fluctuations.
  • 35% probability of drought occurrence nationally, with arid regions at 40% risk.
  • Frequent extreme weather events, including heatwaves and unseasonal rains, impact productivity.

3.2 Expanding Irrigation Coverage

  • Irrigated area increased from 49.3% to 55% of the gross cropped area (FY16–FY21).
  • Punjab (98%), Haryana (94%), and Telangana (86%) have the highest irrigation coverage.
  • Jharkhand and Assam have less than 20% irrigation coverage, necessitating urgent expansion.

3.3 Micro-Irrigation Initiatives

  • India’s micro-irrigation area is just 8%, compared to USA (68.6%) and China (13.7%).
  • Per Drop More Crop (PDMC) initiative has covered 95.58 lakh hectares since FY16.
  • Micro-Irrigation Fund (MIF) allocated ₹4,709 crore, supporting farmers with 2% interest subvention.

4. Agricultural Finance and Credit Expansion

4.1 Growth in Credit to Farmers

  • Kisan Credit Card (KCC) covers 7.75 crore farmers, with a loan portfolio of ₹9.81 lakh crore.
  • Government interest subvention (7% loans) with Prompt Repayment Incentive (3%) supports timely repayment.
  • Ground-Level Credit (GLC) grew from ₹8.45 lakh crore (FY15) to ₹25.48 lakh crore (FY24).

4.2 Crop Insurance and Risk Mitigation

  • Pradhan Mantri Fasal Bima Yojana (PMFBY) covers 4 crore farmers, insuring 600 lakh hectares.
  • Advanced data technologies (YES-TECH, WINDS, CROPIC) enhance insurance transparency.
  • Premium rates have reduced by 32% due to increased participation of state governments and insurers.

5. Digital and Technological Advancements in Agriculture

5.1 Digital Agriculture Initiatives

  • e-National Agriculture Market (e-NAM) connects 1.78 crore farmers and 2.62 lakh traders.
  • 9,204 Farmer Producer Organizations (FPOs) are registered, promoting direct market linkages.
  • Agri-stack and AI-powered analytics improve price discovery and input efficiency.

5.2 Mechanization and Drone Technology

  • Sub-Mission on Agricultural Mechanization (SMAM) has established 26,662 Custom Hiring Centers (CHCs).
  • 15,000 Women Self-Help Groups (SHGs) received financial assistance for agri-drones.
  • 80% subsidy (₹8 lakh per drone) is provided for SHG-led rental services.

6. Food Processing and Supply Chain Modernization

6.1 Expansion of Food Processing

  • Food processing accounts for 12.41% of India’s organized manufacturing employment.
  • Agri-food exports reached USD 46.44 billion, with processed food comprising 23.4% of total exports.
  • Pradhan Mantri Kisan Sampada Yojana (PMKSY) has completed 1,079 projects, strengthening cold storage and logistics.

6.2 Strengthening Food Security

  • National Food Security Act (NFSA) covers 81.35 crore people.
  • Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) extended free food grain distribution.
  • Smart Warehousing and e-NWR Credit Guarantee Scheme improve post-harvest lending.

Conclusion: The Future of Indian Agriculture

Key Strategies for Sustainable Growth

  1. Expand crop diversification and agroforestry for climate resilience.
  2. Boost irrigation efficiency and water management through micro-irrigation.
  3. Strengthen FPOs and cooperative societies for market-driven agriculture.
  4. Accelerate digital agriculture adoption to enhance productivity.
  5. Expand food processing and cold chain logistics to minimize post-harvest losses.

By integrating climate-smart agriculture, financial reforms, technology adoption, and sustainable farming practices, India can ensure long-term food security and global competitiveness.

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