Economic Survey pegs India’s GDP growth for FY24 in the range of 6-6.8%

India's recovery from pandemic was relatively quick, growth to be supported by solid domestic demand, pick up in capital investment, the Survey said

The Indian economy is projected to grow in the range of 6 to 6.8 per cent in 2023-24 as compared to the projected expansion of around 7 per cent in the current fiscal, according to the Economic Survey 2022-23 tabled in the Parliament by Union Finance Minister Nirmala Sitharaman on Tuesday.

The projected growth for the financial year beginning April 1 is the lowest in the past three years. India’s GDP expanded by 8.7 per cent in 2021-22 after a sharp 6.6 per cent contraction in the previous year due to lockdowns and disruptions caused by Covid pandemic. The Indian economy had grown by 3.7 per cent in 2019-20, the year which was also partly impacted by the pandemic.

Addressing a media briefing Chief Economic Adviser V Anantha Nageswaran said the economic recovery from the Covid pandemic is complete. “India's economy is poised to do better in the remainder of this decade,” he said.

The annual survey report noted that “recovering from pandemic-induced contraction, Russian-Ukraine conflict and inflation, Indian economy is staging a broad based recovery across sectors, positioning to ascend to the pre-pandemic growth path in FY23.”

Budget 2023 | What comprises Economic Survey?

According to the Survey, India’s GDP growth will be in the range of 6 per cent to 6.8 per cent in 2023-24, depending on the trajectory of economic and political developments globally. The baseline GDP growth for FY24 is projected at 6.5 per cent.

“Recovery of the economy is complete; non-banking and corporate sectors now have healthy balance sheets, hence, we don't have to speak of pandemic recovery anymore, we have to look ahead to the next phase,” said Nageswaran.

The headline retail inflation is projected to accelerate to 6.8 per cent in 2022-23 from 5.5 per cent in the previous year. The Consumer Price Index (CPI) based retail inflation stood at 6.2 per cent in 2020-21.

The Survey noted that the headline retail inflation went through three phases in calendar year 2022. A rising phase up to April 2022 when it crested at 7.8 per cent, then a holding pattern at around 7 per cent up to August 2022 and then a decline to around 5.7 per cent by December 2022.

Union Budget 2023 | Best of Opinion

The rising phase was largely due to the fallout of the Russia-Ukraine war and a shortfall in crop harvests due to excessive heat in some parts of the country. Excessive heat in summer and uneven rainfall thereafter in some parts of the country affected the farm sector, reducing supply and causing prices of some major products to rise.

Inflation risks coming from global commodity prices are likely to be lower in FY24 than in FY23 due to the projected slowdown in the advanced economies. The inflation challenge in FY24 must be a lot less stiff than it has been this year, the survey noted.

India’s fiscal deficit is projected to decline to 6.4 per cent in the current financial year as compared to 6.7 per cent in the previous year and a high of 9.2 per cent in the pandemic-hit 2020-21.

Also Read | Tax cuts, manufacturing incentives: What to watch out for in Budget 2023

However, there is a risk of widening the current account deficit (CAD). “The widening of the CAD may also continue as global commodity prices remain elevated and the growth momentum of the Indian economy remains strong. The loss of export stimulus is further possible as the slowing world growth and trade shrinks the global market size in the second half of the current year,” the Economic Survey 2022-23 noted.

For the financial year 2023-24, the survey noted that India’s CAD may improve, helped by decline in global commodity prices amid slowdown in global demands. “The CAD needs to be closely monitored as the growth momentum of the current year spills over into the next. Growth is expected to be brisk in FY24 as a vigorous credit disbursal, and capital investment cycle is expected to unfold in India with the strengthening of the balance sheets of the corporate and banking sectors,” report said.

Commenting on the survey report, Vinod Nair, Head of Research at Geojit Financial Services, said, “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 rupee.”

“For the budget, it is going to be a challenge in FY24 to plan out the expenditures due to a short-term slowdown in the economy, high core inflation, and fiscal deficit,” Nair said.