Economic Survey 2024-25: Key Highlights
The Economic Survey of 2024-25 highlights critical risks and trends in the financial sector, emphasizing the need for a balanced approach to financial development.
Financialisation as a Risk
- Financialisation's Impact: Identified as a risk leading to unprecedented levels of debt in developed economies.
- Policy Influence: Dominance of financial markets in shaping policy and macroeconomic outcomes.
Transformative Period in Financial Sector
- Emerging Trends: Increase in consumer credit share and non-bank financing options.
- Declining Bank Dominance:
- Consumer credit share rose from 18.3% in FY14 to 32.4% in FY24.
- Banks' credit share fell from 77% in FY11 to 58% in FY22.
Credit-to-GDP Ratio
- Growth Analysis: Despite growth in bank credit post-April 2022, the credit-to-GDP ratio remains below trend, indicating sustainable growth.
Risks of Artificial Intelligence (AI)
- Transparency Concerns: Challenges in validating AI decisions could lead to trust issues.
- Additional Risks: Human resources, cyber risks, and third-party dependencies.
Insolvency and Bankruptcy Code (IBC) Reform
- Operational Efficiency: Crucial for achieving 7-8% growth over the next decade, especially for MSMEs.
Corporate Bond Market
- Market Growth: Corporate bond issuances valued at Rs 7.3 trillion between April-December 2024.
- Private Placements: Account for 99.1% of bond market mobilization, limiting retail investor participation.
Foreign Direct Investment (FDI) in Services
- Insurance Sector: Received over 62% of $5.7 billion equity inflows into services in FY25.
- FDI Limits: Insurance sector's FDI cap increased from 26% in 2000 to 74% in 2021.