What Economic Survey 2022-23 is Telling Us About Indian Economy

India’s annual pre-budget Economic Survey 2023-24, a flagship document of the government and a testament of India specific tabled by Finance Minister Nirmala Sitharaman has triggered aligned in the right direction of sustained economic growth. According to the Economic Survey 2023, despite the three shocks of COVID-19, Russian-Ukraine conflict and the Central Banks across economies led by Federal Reserve India is third-largest economy in the world in PPP (purchasing power parity) terms; 5th largest in terms of exchange rate. The economy has nearly recouped what was lost, renewed what had paused; re-energised what had slowed during the pandemic. India’s economy may grow 6.5 pc in 2023-24, compared to 7 pc this fiscal and 8.7 pc in 2021-22 while GDP in nominal terms to be 11 pc in next fiscal.

Overall Economic Survey outcome is positive for market as upgrade in FY23 GDP growth expectation of 7% augurs well, while FY24 Inflation of below 6%, within RBI’s targeted range provides major relief. However, FY24 GDP growth of 6-6.8% is tad below desired 7%+ range. Preference on Growth over fiscal deficit would be key trigger for market sentiment going ahead. Other parameters in terms of GST collection, direct taxes and other revenues are encouraging in this challenging global economic environment.

The government is on track to achieve the fiscal deficit target for the year despite fiscal pressures, which is commendable. Manufacturing and investment activities consequently gained traction. By the time the growth of exports moderated, the rebound in domestic consumption had sufficiently matured to take forward the growth of India’s economy. Private Consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY23, the highest among the second quarters of all the years since 2013-14, supported by a rebound in contact-intensive services such as trade, hotel and transport, which registered sequential growth of 16 per cent in real terms in Q2 of FY23 compared to the previous quarter. The agriculture sector in India has grown at an average annual growth rate of 4.6 percent during the last six years, stated Economic Survey 2023

At 7 per cent GDP growth in FY23 and 6-6.8 per cent growth in FY24, India will continue to hold its fastest growing large nation tag. This will create tailwinds for the Indian economy as global capital and technology finds India a bright spot to participate in an otherwise weak global economic order. This shall create employment opportunities and further strengthen the domestic demand base of the country. Real estate, being a derived demand product and an economic multiplier, will certainly benefit from this improved economic outlook for the country. While housing demand remains strong leading to reduced inventory levels, the resumption of construction activities has ensured sustained supply thereby averting sharp price rise risk in the sector.

Widening CAD for an extended period is a concern. The fundamentals of the Indian economy are solid, however, in the short to medium-term, widening current account deficit for an extended period is a concern that could have an implication on growth and depreciation of the INR

The government must address the supply bottlenecks to contain inflationary pressures and bring it back within its comfort range in a timely manner. Government must pursue policies to cushion the economy to reduce the vagaries of the global business cycle and focus on a greater degree on building infrastructure, creating an industrial base, and encouraging new business formation.

Prof Mithilesh Kumar Sinha
Department of Economics
Nagaland University, Lumami