The survey pegged India to clock a 6.5-7% growth in the remaining part of the decade. He also said that global slowdown would favour India but uncertainty on commodity prices and volatility in crude oil are major challenges.
The 6.5% to 7% growth projection is in line with the first advanced estimates of GDP that was released by the Centre earlier this month. The government had pegged GDP for FY23 to be at 7%.
It is also in line with Reserve Bank of India’s (RBI) growth forecast of 6.8% in its monetary policy outcome in December last year.
The Economic Survey, which has been prepared by the CEA, stated that RBI’s projection of retail inflation at 6.8% in the current fiscal is neither too high to deter private consumption, nor so low as to weaken inducement to invest.
“Inflation is likely to be well behaved in FY2023-24 barring headwinds,” the CEA said.
Later in the day, Prime Minister Narendra Modi praised Centre’s Economic Survey and said that it presents a comprehensive analysis of India’s growth trajectory, including the global optimism towards the country.
The Economic Survey presents a comprehensive analysis of India’s growth trajectory including the global optimism to… https://t.co/4myaPjZq2M
— Narendra Modi (@narendramodi) 1675166998000
Here are some of the highlights from the survey:
India’s growth path
The survey has highlighted India’s growth path amid several headwinds and suggested measures to tackle global challenges going forward.
“My optimism is that in the coming decade, rest of the decade, the potential GDP growth, without taking into account export potential, because global economy is still rife with uncertainty, the growth rate would be around 6.5 to 7%, rather than between 6% and 6.5%,” CEA Nageswaran said while presenting the survey.
He also said that global slowdown would favour India but uncertainty on commodity prices and volatility in crude oil are major challenges
India’s economy is projected to slow to 6.5% in the fiscal year starting April but will remain the fastest-growing major economy in the world as it fared better in dealing with the extraordinary set of challenges the globe has faced, the Economic Survey 2022-23 said.
“Slow movement of economic growth over the globe has certainly affected India’s exports in the second half of the year 2022. At a time when most of the countries are facing financial crisis, it needs to be appreciated that the central government has kept the Indian economy moving in its right direction. However, in the survey, the borrowing cost is projected to remain higher which is a cause of concern for the trade & commerce,” CAIT National President B C Bhartia and Secretary General Praveen Khandelwal said in a joint statement to PTI.
‘Well behaved’ inflation
The Survey stated that the consumer price inflation (CPI) in India went through three phases in 2022. A rising phase up to April 2022 when it crested at 7.8%, then a holding pattern at around 7% up to August 2022 and then a decline to around 5.7% by December 2022.
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, the CEA said while presenting the survey.
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, he added.
“Due to the anticipated slowdown in advanced economies, inflation risks coming from global commodity prices are likely to be lower in FY24 than in FY23 and the survey expresses that the inflation challenge in FY24 must be a lot less stiff than it has been this year,” the CEA said.
Vivek Rathi, Director-Research, Knight Frank India told TimesofIndia.com: “At 7% GDP growth in FY23 and 6-6.8% 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 as India becomes a preferred global supplier backed by improving ease of doing business and global competitiveness scores.”
Fiscal deficit
According to the Survey, fiscal deficit is expected to be at 6.4% of GDP in FY23. The Survey highlighted that conservative budget assumptions provided a buffer during global uncertainties. The resilience in the fiscal performance was due to a recovery in economic activity and buoyancy in revenues.
Direct taxes grew at 26% year-on-year (y-o-y) basis due to corporate and personal income tax growth in FY22. The Survey further added that growth rates observed in the major direct taxes during the first eight months of FY23 were much higher than their corresponding longer-term averages.
High imports have led to a 12.4% YoY growth in the customs collection from April to November 2022. The excise duty collection has declined by 20.9% from April to November 2022 on a YoY basis.
‘Follow path of fiscal prudence’
The Economic Survey further argued that fiscal discipline will ensure significant fiscal space for policy action in uncertain times.
“As India’s economic recovery advances, amidst the continuing global uncertainties and risks, the fiscal glide path illuminates the path for fiscal policy. That will ensure more significant fiscal space for policy action in uncertain times.
“Further, in reality, fiscal discipline translates into a fiscal stimulus for all sections of the economy through lower interest rates,” the Economic Survey 2022-23 said.
The suggestion comes on the backdrop of increasing expectations of the middle class that the Budget, to be unveiled on February 1, will have some tax sops to tide over the impact of inflation.
The Survey further said that fiscal prudence will ensure lower interest rates for educational loans, housing loans, car loans and business loans, thereby putting more money in the hands of people.
A higher fiscal deficit translates to larger government borrowings, which in turn push interest rates.
Disinvestment proceeds
About Rs 4.07 lakh crore has been realised as disinvestment proceeds in the past nine years, and post-2014 the government is engaging with the private sector as a co-partner in the development, the Economic Survey said on Tuesday.
In the current fiscal, out of the budgeted amount of Rs 65,000 crore, 48 per cent or over Rs 31,000 crore has been collected as of January 18, 2023.
The survey said privatisation of Air India re-ignited the privatisation drive, and evidence shows that labour productivity and the overall efficiency of the PSUs disinvested during 1990-2015 has improved.
“During FY15 to FY23 (as of January 18, 2023), an amount of about Rs 4.07 lakh crore has been realised as proceeds from disinvestment through 154 transactions using various modes/instruments,” said the Survey tabled in Parliament by finance minister Nirmala Sitharaman.
Falling unemployment rates
The survey showed labour markets in India have recovered beyond pre-Covid levels, with unemployment rates falling during the three financial years through 2020-21.
It stated that while the pandemic impacted both labour markets and employment ratios; however, with sustained efforts in the last few years and quick response after the pandemic, and quick vaccination helped.
“Over time, there is a visible trend towards bigger factories employing more than 100 workers, their numbers rising by 12.7 per cent from FY17 to FY20, compared to a broadly constant number of smaller factories,” the government said in a release after the survey was tabled.
GST tax payers doubled
The GST tax payers doubled to 1.4 crore from 70 lakh in 2022. The gross GST collections were Rs 13.40 lakh crore from April to December 2022, an annual growth of 24.8 % with an average monthly collection of Rs 1.5 lakh crore, noted the Survey.
The improvement in GST collections has been due to the nationwide drive against GST evaders and fake bills and systemic changes introduced such as rate rationalisation correcting inverted duty structure.
Capital expenditure
According to the Survey, the capital expenditure by government has steadily increased from a long-term average 2.5% of GDP in FY22 PA. It is further budgeted to increase to 2.9% of GDP in FY23 highlighting an improvement in the quality of Government expenditure over the years.
The government debt to GDP ratio increased from 75.7% of end-March 2020 to 89.6% at the end of the pandemic year FY21. It is estimated to decline to 84.5% of GDP by end-March 2022. The emphasis on capex-led growth will enable India to keep the growth-interest rate differential positive. A positive growth-interest rate differential keeps the debt levels sustainable.
Exports displayed resilience
The Economic Survey highlights that during FY23 (till December 2022) India’s exports displayed resilience on the back of record levels of exports in FY22. Petroleum products, gems & jewellery, organic & inorganic chemicals, drugs & pharmaceuticals were among the leading export items. However, the slowdown in Indian exports is inevitable in a slowing global economy, characterised by slowing global trade.
Apart from the elevated crude oil prices, the revival of economic activity contributed to an increase in imports. Petroleum, crude & products; electronic goods; coal, coke & briquettes, etc.; machinery, electrical & non-electrical and gold were among the top import items. It mentions that while continued softening of the global commodity price outlook would assist moderate imports going forward, non-gold, non-oil imports may not decelerate significantly.
India achieved an all-time high annual merchandise export of $422 billion in FY22. Merchandise export were $332 billion over April-December 2022 against $305 billion during the period April-December 2021. Significant strides in exports were registered in drugs and pharmaceuticals, electronic goods and organic and inorganic chemicals sector in FY22.
On the issue of Balance of Payments (BoP), the Economic Survey says that it encountered pressures during the year under review. While the impact of a sharp rise in oil prices was discernible in the widening of the Current Account Deficit (CAD), notwithstanding the cushion provided by the surplus on invisibles (services, transfer, and income), policy tightening by the US Federal Reserve and the strengthening of the US dollar led to foreign portfolio investment (FPI) outflows.
As a result, the surplus of the capital account was lower than the CAD leading to a depletion of forex reserves on a BoP basis. Forex reserves as of the end December 2022 stood at US$ 562.72 billion, accounting for 9.3 months of imports.
Agriculture sector remains buoyant
The survey said that India’s agriculture sector has been witnessing robust growth with an average annual growth rate of 4.6 percent over the last six years.
It attributed the sector’s growth and buoyancy to the “measures taken by the government to augment crop and livestock productivity, ensure certainty of returns to the farmers through price support (Minimum Support Price), promote crop diversification” and, focused interventions to “enhance credit availability, facilitate mechanisation and boost horticulture and organic farming”.
The Survey observed that these interventions are in line with the recommendations of the Committee on Doubling of Farmers’ Income.
‘Cryptos not financial assets’
Cryptocurrencies have no intrinsic cashflows to them and the latest collapse of the crypto exchange FTX exposes the vulnerabilities in such investments, the Economic Survey said.
“The recent collapse of the crypto exchange FTX and the ensuing sell-off in the crypto markets have placed a spotlight on the vulnerabilities in the crypto ecosystem,” the survey said.
It added crypto assets are “self-referential instruments” and do not strictly pass the test of being a financial asset because it has no intrinsic cashflows.
The survey also cited how US regulators have disqualified Bitcoin, Ether and various other crypto assets as securities.
Rise in health expenditure
The government’s share in the total health expenditure has increased from 28.6% in financial year 2014 to 40.6% in 2019 with a significant decline in out-of-pocket expenditure, according to the Economic Survey 2022-23.
the survey stated the government has also strengthened health infrastructure and prepared itself to address present and future needs.
“The share of government health expenditure in total health expenditure has increased from 28.6 per cent in the financial year 2014 to 40.6 per cent in 2019, with a concomitant decline in out-of-pocket expenditure as a percentage of total health expenditure from 64.2 per cent in 2014 to 48.2 per cent in 2019,” the survey stated.
The National Health Account (NHA) for the financial year (FY) 2019 — the latest available account — highlights the rising importance of public healthcare and social security in ensuring universal health coverage, it said.
Outlays of social sector
Speaking about the components of the social sector, CEA Nageswaran said, “Not only the full document (of the Economic Survey) but the highlights have captured the element with outcome as well, ranging from electricity, healthcare, food security, affordable housing, drinking water and sanitation, all the way to cooking fuels, all development and skill development.”
The CEA also said, “General government spending with both the Union and the state governments put together, education has gone up from Rs 5.3 lakh crore to Rs 7.6 lakh crore and healthcare almost more than double in the last three years.”
Other than health and education, the CEA said, “We (our spending on social sector) have gone up from Rs 4.86 lakh crore to Rs 8.3 lakh crore approximately. Primary school dropout rate has come down from around 4.7 to 1.5 while pupil to teacher ratio has improved from 34 to 26. And, there is going to be 14,500 PM SHRI Schools soon.”
Thrust on rural development
Economic Survey 2023 noted that 65% (2021 data) of the country’s population lives in the rural areas and 47 per cent of the population is dependent on agriculture for livelihood. Thus, the focus of the government on rural development is imperative.
The government’s emphasis has been on improving the quality of life in rural areas to ensure more equitable and inclusive development.
The aim of engagement of the government in the rural economy has been “transforming lives and livelihoods through proactive socio-economic inclusion, integration, and empowerment of rural India.”
(With inputs from agencies)
