Growth to slow, India still fastest growing economy

Economic Survey 2022-23 bullish on private investments picking up; CEA says the global slowdown could actually work in favour of India

'Economic Survey 2022-23' presented by Chief Economic Advisor V. Anantha Nageswaran, during a press conference, in New Delhi, Tuesday, Jan. 31, 2023. (PTI)

NEW DELHI:  India’s GDP could grow at 6.5% in FY24 despite a slowing global economy thanks to the reforms undertaken by the Narendra Modi government in the past eight years, the Economic Survey 2022-23 tabled in Parliament on Tuesday said.

“The growth in the upcoming year will be supported by solid domestic demand and a pickup in capital investment,” the survey said with a caveat that tighter monetary policy globally and subdued exports might hamper the projections.

Unlike last year when 8-8.5% growth was projected, this year’s survey showed less conviction on growth. It pegged real GDP growth in the range of 6-6.8% depending on the trajectory of economic and political developments globally.

The survey report is bullish on private capital expenditure picking up thanks to cleaning up of the private sector balance sheet. It said the financial sector stress seen in the previous decade rising bad loans, low credit uptake and falling private investments is now behind us.

Private investment, according to the survey report, has been aided by the government capex which increased 2.7 times in the past seven years. The capex thrust of the government was part of a strategic package aimed at crowding-in private investment, it noted.

Chief Economic Advisor to the government Dr V Anantha Nageswaran told reporters that capital investment by the private sector is beginning to kick in despite several shocks coming one after another. “Once the shocks dissipate, I expect India’s credit and capex cycle to gather more steam than what they have today,” he added.  

According to the CEA, the recessionary pressures worldwide could prove beneficial for the country as global commodity prices, especially crude oil, would remain at moderate levels. He says that as long as crude oil prices remain below $100 a barrel, it won’t hit India’s growth prospects. 

While talking about structural reforms such as the GST rollout and the Insolvency and Bankruptcy Code undertaken over the past eight years, the survey also sets the agenda for next round of reforms – administrative reforms, contract enforcement, dismantling licence, inspection & compliance, access to clean energy and energy security, among others.

Fine Print

• GDP growth to slow to 6.5% in FY24 from 7% this fiscal, but India will remain the fastest growing economy in the world
• Growth in FY23 has been led by private consumption and capital formation
• Gross tax revenues touched 65% of Budget estimates at Rs 17.81 lakh crore in first eight months of the current fiscal, propelled by corporate and personal income tax mop-up
• RBI’s projection of retail inflation at 6.8% in FY23 is neither too high to deter private consumption, nor so low to weaken investments
• Rupee to remain under pressure due to muted exports growth and widening current account deficit
• Domestic coal production to soar to 1.5 billion tonnes by 2030, will replace imports
• Survey calls for entirely dismantling licensing, inspection and compliance regime, and a host of other reforms to accelerate economic growth to sustained higher levels
• It suggests simpler tax rules to lure Indian-owned startups abroad to shift to India