Economic Survey 2022-23: A Summary
The Economic Survey 2022-23, tabled in the Parliament today by the Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman provides a comprehensive overview of the Indian economy and its performance during the financial year 2022-23. The Survey projects a baseline GDP growth of 6.5% in real terms for the financial year 2023-24 and expects the economy to grow at 7% for the year ending March 2023, following an 8.7% growth in the previous financial year.
Factors contributing to India's growth:
Rebound in Private Consumption: Private consumption as a percentage of GDP stood at 58.4% in Q2 of FY23, which is the highest among the second quarters of all the years since 2013-14. This was supported by a rebound in contact-intensive services such as trade, hotels, and transport.
Higher Capital Expenditure (Capex): The capital expenditure of the central government increased by 63.4% in the first eight months of FY23, which was another growth driver of the Indian economy in the current year.
Near-universal vaccination coverage: The near-universal vaccination coverage enabled people to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas.
Return of Migrant Workers: The return of migrant workers to cities to work in construction sites helped in witnessing a significant decline in housing market inventory overhang to 33 months in Q3 of FY23 from 42 months last year.
Strengthening of Corporate and Banking Balance Sheets: The balance sheets of the Corporates and the public sector banks have been strengthened, which has enabled the banks to increase credit supply.
Growth in MSME sector: Credit growth to the Micro, Small, and Medium Enterprises (MSME) sector has been remarkably high, averaging over 30.5% during Jan-Nov 2022.
The Survey projects a baseline GDP growth of 6.5% in real terms for the financial year 2023-24 and expects the economy to grow at 7% for the year ending March 2023. The projection is broadly comparable to the estimates provided by multilateral agencies such as the World Bank, the IMF, and the ADB and by RBI, domestically. The Survey says that the 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.
The Reserve Bank of India (RBI) projects headline inflation at 6.8% in FY23, which is outside its target range. Despite the three shocks of COVID-19, the Russian-Ukraine conflict and the central banks across economies led by the Federal Reserve responding with synchronized policy rate hikes to curb inflation, leading to an appreciation of the US Dollar and the widening of the Current Account Deficits (CAD) in net importing economies, agencies worldwide continue to project India as the fastest-growing major economy at 6.5-7.0% in FY23.
The Survey also highlights the surge in growth of exports in FY22 and the first half of FY23, which induced a shift in the gears of the production processes from mild acceleration to cruise mode.
In conclusion, the Economic Survey 2022-23 provides a comprehensive overview of the Indian economy and its performance during the financial year 2022-23. The optimistic growth forecasts stem from a number of positives, such as the rebound of private consumption, higher Capital Expenditure
In a recent survey, the economic outlook for India has been assessed. Despite the depreciating rupee and the likelihood of further interest rate hikes by the US Fed, the Indian economy is projected to remain strong with growth estimated between 6.5-7.0%. This growth estimate is higher compared to most major economies and is a reflection of India’s underlying economic resilience and ability to recover from global economic shocks.
The growth of India’s economy can be attributed to the rebound in domestic consumption, driven by the surge in contact-intensive services and the release of pent-up demand in the housing market. The universalization of vaccination coverage has also played a significant role in lifting the housing market.
The growth of exports may have moderated in the second half of FY23 but the rebound in domestic consumption has taken over to drive the growth of the Indian economy. The growth of manufacturing and investment activities has gained traction, contributing to a rise in domestic capacity utilization.
However, the survey cautions that the Current Account Deficit (CAD) needs to be closely monitored as the growth momentum of the current year spills over into the next. The downside risk to CAD stems from a swift recovery driven mainly by domestic demand and to a lesser extent, by exports.
Globally, the growth of the economy has been projected to decline in 2023 and is expected to remain subdued in the coming years. The slowing demand will likely push down global commodity prices and improve India’s CAD in FY24. However, downside risks to the global economic outlook appear elevated with inflation persisting in advanced economies and central banks hinting at further rate hikes.
In conclusion, despite the challenges posed by the depreciating rupee and global economic shocks, India’s economy is projected to remain strong and resilient. The growth of the Indian economy can be attributed to the rebound in domestic consumption and the growth of manufacturing and investment activities. Nevertheless, the CAD needs to be closely monitored to ensure sustainable growth in the long run.
The outlook for 2023-24, according to the Survey, is promising with India's quick recovery from the pandemic and growth being driven by strong domestic demand and an increase in capital investment. The private sector's cautiousness in capital expenditure has been offset by the government's substantial increase in capital expenditure, leading to the growth of the Capex cycle. Structural reforms like GST and the Insolvency and Bankruptcy Code have improved the efficiency and transparency of the economy.
The global growth is forecasted to slow from 3.2% in 2022 to 2.7% in 2023, per IMF's World Economic Outlook in October 2022, impacting trade growth and increasing uncertainty. The current account balance faces multiple risks, including a high import bill due to strong domestic demand and high commodity prices and plateauing export growth due to slackening global demand. A widening current account deficit may result in currency depreciation pressure. Inflation may prolong the tightening cycle and keep borrowing costs high, leading to low growth in FY24.
India's Inclusive Growth
The Survey highlights that inclusive growth creates jobs and the employment levels have risen in the current financial year as per official and unofficial sources. The Emergency Credit Line Guarantee Scheme supported MSMEs during the COVID shock, with 83% of the borrowers being micro-enterprises. The lower non-performing asset rates among ECLGS borrowers compared to those eligible but not availing the scheme, show its effectiveness. MSMEs' GST paid after declining in FY21 has now crossed the pre-pandemic level of FY20.
Schemes like MGNREGA, PM-KISAN, and PM Garib Kalyan Anna Yojana have significantly contributed to lessening impoverishment in the country. The UNDP report of July 2022 stated that the recent inflationary episode in India would have a low poverty impact due to well-targeted support. Improved rural welfare indicators as per the National Family Health Survey (NFHS) from FY16 to FY20 cover aspects like gender, fertility rate, household amenities, and women empowerment.
India's economy has shown its resilience withstanding the challenge of mitigating external imbalances caused by the Russian-Ukraine conflict without losing growth momentum. India's stock markets had a positive return in CY22 and the inflation rate was within the tolerance range compared to advanced nations. India's economy has nearly recovered, renewed, and rekindled growth, making it the third-largest in PPP terms and fifth-largest in market exchange rates.