Economic Survey sees India’s economic growth at 6-6.8% in FY23-24

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Aided by the recovery in capital investment and strong domestic demand, the Indian economy is expected to grow by 6-6.8 percent in 2023-24, the Economic Survey 2022-23 said on Tuesday.

Baseline growth for 2023-24 was pegged at 6.5 percent in real terms, the survey showed even when it confirmed that initial indications of a new private sector capital formation cycle were clearly visible.

India has now completed its full recovery from the pandemic, the survey said, and is positioning itself to ascend onto a pre-pandemic growth trajectory. It also highlighted the role of vaccination in driving economic activity.

He noted that private capital expenditures soon need to take a “leading role” to put job creation on a fast track in the country. The survey indicated that it was budgeted capital expenditures – which rose 2.7 times in the past seven years from FY16 to FY23 – that re-energized the capital expenditure cycle.

Face many obstacles

The latest edition of the economic survey, presented by Finance Minister Nirmala Sitharaman on Tuesday in Lok Sabha, highlighted the resilience of the economy in the current fiscal balance sheet to withstand global shocks such as the conflict between Russia and Ukraine without losing growth momentum even while citing the global economic situation as a major risk factor. For growth forecasts for fiscal year 23-24.

She highlighted that this expected growth range of 6-6.8 percent depends on the course of economic and political developments at the global level. The latest survey comes against a challenging backdrop as recession fears take center stage globally and interest rates rise in domestic demand.

The poll came a day before Sitharaman will present her last full budget to this government on Wednesday, ahead of the general elections in 2024 and during the current year when as many as nine states head to the polls.

The survey indicated that India’s GDP growth projections are broadly comparable to estimates provided domestically by multilateral agencies such as the World Bank, International Monetary Fund, Asian Development Bank and Reserve Bank of India.

The fastest growing economy

Economic watchers said that even with this growth forecast of 6 to 6.8 percent for 2023-24, the Indian economy would continue to hold the tag of the world’s fastest-growing largest economy.

For the current fiscal year (2022-2023), the survey pegged economic growth at 7 percent. This follows growth of 8.7 percent in the previous fiscal year.

“Despite the three shocks of Covid-19, the Russian-Ukrainian conflict, central banks across economies led by the Federal Reserve responded by simultaneous interest rate hikes to curb inflation, leading to an appreciation of the US dollar and a widening of current account deficits in net importing economies,” the agencies continue to say. Worldwide, India is projected as the fastest growing major economy with a growth rate of 6.5-7 percent in 2022-23.”

In terms of the factors that represent a positive trend for growth prospects in India, the survey cited the following reasons:

  • (i) The limited health and economic repercussions for the rest of the world from the current rise in Covid-19 infections in China, and thus the continued normalization of supply chains.

  • (2) It turns out that the inflationary drivers from the reopening of the Chinese economy are neither significant nor persistent.

  • (iii) Recessionary trends in the major developed economies are leading to a cessation of monetary tightening and a return of capital inflows to India amid a stable domestic inflation rate of less than 6 percent.

  • (iv) This improves animal spirit and provides more impetus for private sector investment.