Economic Survey, which was submitted in Parliament on January 31, India’s GDP will grow at a baseline rate of 11 per cent in nominal terms and 6.5 per cent in real terms in 2023-24, according to the 2022-23 The survey, which projected real growth in the range of 6-6.8 per cent depending on downside and upside risks, emphasised that “agencies worldwide continue to project India as the fastest growing major economy” despite the three shocks of Covid-19, the Russia-Ukraine war, and synchronised policy rate hikes by central banks around the world, which resulted in the US dollar appreciating and the current account deficit (CAD) widening in net importing economies.
The economy is expected to grow at 7 per cent for the year ending march 2023, up from 8.7 per cent in the previous financial year. Credit growth to the MSME sector has been remarkably high, averaging over 30.5 per cent during jan-nov 2022.
The survey identified four important advantages for India’s growth prospects. They are as follows: limited health and economic fallout from China’s Covid-19 infection surge, inflationary impulses from China’s opening up proving to be neither significant nor persistent, recessionary conditions in major advanced economies triggering a cessation of monetary tightening and a return of capital flows to India amidst stable domestic inflation below 6%. According to the Economic Survey, these three elements will generate the fourth upside, an increase in animal spirits, which will provide additional encouragement to private sector investment.
The central government’s capital expenditure (capex), which increased by 63.4 per cent in the first eight months of FY23, was another growth driver of the Indian economy in the current year. The RBI expects inflation to be 6.8 per cent in FY23, beyond its target. Range return of migrant workers to construction activities aided housing market inventory overhang to 33 months in Q3 of FY23 from 42 month last year.
Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company, says that, “Economic Survey presents a cautiously optimistic forecast. The survey correctly predicts that pitch is becoming easy with nascent recovery in global macros, lower energy prices/ inflation and revival in private sector investment in days to come. It also highlights an odd doosra ball which needs to be managed in the form of balance of payment deficit and support to the consumption at the bottom of the pyramid. India from being a coach ( follower ) to global growth has become the engine ( leader ) for global growth. Economic survey presents the direction of that journey. The speed of that journey will be determined by the execution on the ground.”
Madhavi Arora, Lead Economist, Emkay Global Financial Services, says “The Ecosurvey depicts a positive picture about the economy ahead, hoping that the growth trajectory will be supported by multiple structural reforms taken over the years, and better economic health of corporates and banks balancesheets, helped by healthy public sector capex. The hope is that all of it should help in starting a new private sector capital formation cycle – signs of which are visible. However, the global risks of slowdown/recession, tighter financial conditions, external sector imbalances pose a risk.
We think, despite recovery in domestic economic activity not yet broad-based, protracted global drags in the form of still-elevated prices, shrinking corporate profitability, demand-curbing monetary policies and diminishing global growth prospects weigh on output. This will put pressure on the domestic growth story, which still lacks the next lever of secular growth.”
Vivek Rathi, Director-Research, Knight Frank India, mentioned“The theme of Economic Survey is resilience demonstrated by the Indian economy amid challenges posed by geopolitical events in this period. 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. 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. The historic legacy of housing shortage in the country provides a long runway for growth of the sector and developments highlighted in the Economic Survey further cement its strong position.”
