Economic Survey

India Economic Survey 2014-15

Make in India and Structural Reforms

GDP Growth (Actual)

7.4%

Forecast: 5.4-5.9%

Inflation (CPI)

5.9%

Consumer Price Index

Wholesale Inflation (WPI)

2.0%

Wholesale Price Index

Fiscal Deficit

4.1% GDP

Union Budget (Actuals)

Key Theme

Make in India and Structural Reforms

Key Highlights

GDP growth jumped to 7.4% under the new GDP series (base year revised to 2011-12), surpassing China for the first time
New GDP methodology launched by CSO with 2011-12 base year, using MCA21 corporate data for the first time
CPI inflation moderated sharply to 5.9% from 9.5% in FY14, aided by lower crude oil prices
WPI inflation dropped to 2.0%, with deflationary trends in manufactured goods
Current account deficit remained well-managed at 1.3% of GDP
Fiscal deficit at 4.0% of GDP, marginally above the 3.6% target due to revenue shortfall
Crude oil prices collapsed from $110/barrel to below $50, providing a massive terms-of-trade windfall
Government used the oil price window to deregulate diesel prices and implement Direct Benefit Transfer for LPG (PAHAL)
FDI inflows surged to $34.9 billion on the back of Make in India sentiment
Jan Dhan Yojana opened 12.5 crore bank accounts in its first six months, setting a Guinness World Record
Insurance FDI cap raised from 26% to 49% as part of financial sector liberalisation
Coal block auctions began following Supreme Court cancellation of 204 coal blocks allocated since 1993

Policy Recommendations

1 Pursue "Big Bang" reforms through a series of incremental steps — "a persistent, encompassing, and creative incrementalism"
2 Rationalise the subsidy regime further by extending DBT to fertiliser and food subsidies
3 Implement GST as the most critical indirect tax reform to create a unified national market
4 Address the twin balance sheet problem through a centralised Public Sector Asset Rehabilitation Agency
5 Revamp the PPP framework for infrastructure with standardised contracts and dispute resolution mechanisms
6 Create Technology and Financial Inclusion through the JAM Trinity (Jan Dhan-Aadhaar-Mobile)
7 Accelerate Aadhaar enrolment and seeding for efficient benefit delivery
8 Reform agricultural marketing laws to allow direct procurement and e-mandis
9 Pursue labour law simplification by consolidating 44 central labour laws into 4 codes
10 Strengthen the Make in India programme through trade facilitation, logistics improvement, and skill development
11 Invest in urban infrastructure through Smart Cities and AMRUT programmes

Survey Predictions vs Budget Outcomes

Comparison between Economic Survey predictions and actual Union Budget allocations

Metric	Survey Prediction	Actual Budget	Deviation
GDP Growth (%)	5.4-5.9	7.4 (new series)	New series showed higher growth
Fiscal Deficit (% of GDP)	3.6	4.0	+0.4% (revenue shortfall)
CPI Inflation (%)	6.0-7.0	5.9	At lower end
Current Account Deficit (% of GDP)	1.5	1.3	-0.2%
Crude Oil ($/barrel avg)	85-90	84 (avg)	Collapsed in H2

Union Budget 2014-15 Summary

Corresponding budget data to read alongside the Economic Survey Actuals

Total Receipts

16.64 lakh crore

Total Expenditure

16.64 lakh crore

Fiscal Deficit

5.11 lakh crore

Revenue Deficit

3.47 lakh crore

View Union Budget 2014-15 in detail

Detailed Analysis

The Economic Survey 2014-15 was the first under the new Chief Economic Adviser Arvind Subramanian, and it immediately established a distinctive intellectual character that would mark his tenure. The Survey, presented on February 27, 2015, was simultaneously a rigorous economic analysis and a policy manifesto — at times philosophical, frequently iconoclastic, and always engaging. Its central metaphor of "wiping every tear from every eye" (borrowing from Gandhiji) set the tone for a document that sought to balance growth ambition with social inclusion. The headline macroeconomic story was dominated by the Central Statistics Office's decision to revise the GDP series with a new base year of 2011-12, replacing the older 2004-05 series. This revision, which incorporated data from the MCA21 database of registered companies for the first time, produced significantly higher growth estimates. Under the new methodology, FY15 growth was estimated at 7.4%, making India the fastest-growing major economy and overtaking China — a fact that generated considerable international attention and some domestic scepticism about the new numbers. The Survey engaged with these debates candidly, acknowledging measurement challenges while defending the methodological improvements. The global oil price collapse was the most significant external development of the year. Brent crude fell from around $110 per barrel in June 2014 to below $50 by January 2015, driven by a combination of OPEC's decision to maintain production, the US shale revolution, and slowing Chinese demand. For India, a net oil importer to the tune of 80% of its crude requirement, this was an extraordinary windfall. The Survey estimated the terms-of-trade gain at approximately 1.5% of GDP. Critically, the government used this window of low oil prices to implement long-pending reform of petroleum subsidies. Diesel prices were fully deregulated in October 2014, and the PAHAL scheme for direct transfer of LPG subsidies to bank accounts was rolled out nationally. The Survey praised these moves as examples of how to convert a temporary windfall into permanent structural reform, preventing the subsidy bill from ballooning again when oil prices inevitably recovered. CPI inflation moderated significantly to 5.9% from 9.5% the previous year. While lower oil prices contributed, the Survey credited the RBI's adoption of flexible inflation targeting (the Monetary Policy Framework Agreement signed in February 2015) for anchoring expectations. The shift from WPI to CPI as the nominal anchor for monetary policy was described as a landmark institutional reform. The fiscal picture was mixed. The fiscal deficit came in at 4.0% of GDP, above the original target of 3.6%. Tax revenue growth disappointed, partly due to the deflationary impact of oil prices on nominal GDP (which was the denominator). The government responded by pushing back the fiscal consolidation roadmap, targeting 3.0% by FY18 rather than FY17. The Survey defended this flexibility, arguing that rigid adherence to targets in the face of economic headwinds could be counterproductive. The Survey devoted an entire chapter to what it termed the "JAM Trinity" — Jan Dhan bank accounts, Aadhaar biometric identification, and Mobile phone connectivity. It argued that the convergence of these three platforms created an unprecedented opportunity for efficient, targeted, and corruption-free delivery of government benefits. The Jan Dhan Yojana had opened 12.5 crore bank accounts in its first six months — a Guinness World Record — providing the foundation for this transformation. The Survey laid out a vision of moving all major subsidies (food, fertiliser, fuel) to a DBT architecture, which it estimated could save the government Rs 1 lakh crore annually. On the twin balance sheet problem — the interlinked stress on corporate balance sheets (over-leveraged) and bank balance sheets (rising NPAs) — the Survey proposed the creation of a centralised Public Sector Asset Rehabilitation Agency (PARA) to take over the largest stressed assets from banks. This recommendation drew from international experience with "bad banks" in Sweden, South Korea, and the United States. While the specific PARA proposal was not immediately implemented, it influenced the eventual creation of the National Asset Reconstruction Company (NARCL) several years later. The external sector continued to strengthen. The current account deficit remained at a comfortable 1.3% of GDP, and FDI inflows surged to $34.9 billion, reflecting optimism around the Make in India initiative launched in September 2014. The insurance and defence sectors were opened to higher FDI limits, and the ease of doing business campaign began to show results in subsequent World Bank rankings. The coal sector underwent a transformative change following the Supreme Court's cancellation of 204 coal blocks that had been allocated without auction since 1993. The government conducted transparent auctions of these blocks, generating expected revenue of over Rs 2 lakh crore for coal-bearing states. The Survey highlighted this as a model of natural resource governance reform. Perhaps the most memorable feature of the Survey was its embrace of analytical eclecticism. It drew on behavioural economics to discuss subsidy reform, on game theory to analyse GST negotiations between the Centre and states, and on climate science to warn about the growth risks of climate change. The Survey coined the phrase "persistent, encompassing, and creative incrementalism" to describe India's reform strategy — arguing against waiting for a single "Big Bang" moment and instead advocating steady, cumulative reforms across multiple fronts. On the social development front, the Survey highlighted the need for dramatic improvements in education quality, noting that learning outcomes remained poor despite rising enrolment. It also called for a fundamental restructuring of the healthcare delivery system, pointing to India's out-of-pocket health expenditure — among the highest in the world — as a driver of poverty. The infrastructure deficit received focused attention. India's infrastructure spending at roughly 5% of GDP was well below the 8-9% that peer economies like China invested during their high-growth phases. The Survey documented the Rs 8.5 lakh crore worth of stalled projects across roads, power, steel, and real estate, attributing the delays to land acquisition challenges, environmental clearance bottlenecks, and financing constraints. It proposed a revamped PPP framework with standardised model concession agreements, a 3P India institution to build public sector capacity for PPP management, and a dedicated dispute resolution mechanism. The education sector analysis was particularly stark. Despite near-universal enrolment in primary schools, the quality of learning remained deeply inadequate. The Survey cited data showing that 25% of Class VIII students could not read a simple paragraph, and that India's performance on international assessments lagged far behind not only developed countries but also poorer Asian nations like Vietnam. The proposed remedy included autonomy for educational institutions, accountability through outcome-based assessment, and a dramatic expansion of vocational training aligned with industry needs. The Survey's environmental analysis introduced the concept of "green national accounting," arguing that GDP alone was an insufficient measure of progress when natural capital was being depleted. It estimated the cost of environmental degradation at 5.7% of GDP, principally from air pollution, water contamination, and soil degradation. The chapter made a forward-looking case for carbon taxation and incentivising renewable energy investment — themes that would gain prominence in subsequent Surveys. The Survey concluded by projecting growth of 8.1-8.5% for FY16, anticipating that the combination of lower oil prices, monetary easing by the RBI, an improving investment climate, and government reform momentum would propel the economy to a higher growth orbit. While the actual number for FY16 would broadly validate this optimism, the path would prove less smooth than anticipated, with the global economy entering a period of significant turbulence.

Source: Official Economic Survey Document

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