INDIAN ECONOMY IN FY23 RECOUPED. RENEWED. RE-ENERGISED

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The Economic Survey prepared under the supervision of the Chief Economic Advisor estimates the nominal GDP has been estimated at 11%. It points out that the upside to India’s growth outlook arises from -

(i) Limited health and economic fallout for the rest of the world from the current surge in Covid-19 infections and, therefore, continued normalisation of supply chains.

(ii) Inflationary impulses from the reopening of China’s economy turning out to be neither significant nor persistent.

iii) Recessionary tendencies in major Advanced Economies (AEs) triggering a cessation of monetary tightening and a return of capital flows to India amidst a stable domestic inflation rate below 6 per cent.

However,, the challenge of the depreciating rupee persists with the likelihood of further increases in policy rates by the US Fed. 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.

INDIA OUTLOOK 2023-24

The Survey notes with optimism that Indian economy appears to have staged a full recovery in FY22, positioning itself to ascend to the pre-pandemic growth path in FY23. Yet in the current year, India has also faced the challenge of reining in inflation that the European strife accentuated.

Strong domestic demand amidst high commodity prices will raise India’s total import bill and contribute to unfavourable developments in the current account balance. These may be exacerbated by plateauing export growth on account of slackening global demand. Should the current account deficit widen further, the currency may come under depreciation pressure.

India’s growth in the upcoming year will be supported by solid domestic demand and a pickup in capital investment. Aided by healthy financials, incipient signs of a new private sector capital formation cycle are visible and more importantly, compensating for the private sector’s caution in capital expenditure, the government has raised capital expenditure substantially.

KEY STATEMENTS

India to witness GDP growth of 6.0 per cent to 6.8 per cent in 2023-24, depending on the trajectory of economic and political developments globally.
A baseline GDP growth of 6.5 per cent in real terms in FY24 is projected.
Economy is expected to grow at 7 per cent (in real terms) for the year ending March 2023, this follows an 8.7 per cent growth in the previous financial year.
Credit growth to the MSME sector has been remarkably high, over 30.5 per cent, on average during Jan-Nov 2022.
Capital expenditure of the central government, which increased by 63.4 per cent in the first eight months of FY 23, was another growth driver of the Indian economy in the current year.
RBI projects headline inflation at 6.8 per cent in FY23, which is outside its target range.
Housing market witnessed a significant decline in inventory overhang to 33 months in Q3 of FY23 from 42 months last year.
Surge in growth of exports in FY22 and the first half of FY23 induced a shift in the gears of the production processes from mild acceleration to cruise mode.
Private consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY23, supported by a rebound in contact-intensive services such as trade, hotel and transport.
Survey points to the lower forecast for growth in global trade by the world trade organisation, from 3.5 per cent in 2022 to 1.0 per cent in 2023.