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The Economic Survey 2023-24 tabled in Parliament on July 22, 2024 reflects a great picture of India's economic recovery. The report highlights several key points:
- Strong Post-Pandemic Rebound: India's real GDP in 2023-24 was 20% higher than pre-pandemic levels in 2019-20, a feat achieved by only a few major economies globally.
- Positive Growth Outlook: The Survey forecasts continued strong growth in FY 2025, although with cautions regarding geopolitical tensions, financial market fluctuations and climate risks.
- Resilience Amidst Global Challenges: Despite global growth of just 3.2% in 2023 and varying performances among countries, India's economy maintained momentum built in 2022-23.
- Focus on Macroeconomic Stability: The Economic Survey credits India's focus on maintaining macroeconomic stability for mitigating the impact of external challenges.
- Boost in Capital Formation: The government's emphasis on capital expenditure and sustained private investments have fuelled a 9% increase in gross fixed capital formation in real terms for FY 2024.
Overall, the Economic Survey 2023-24 offers an optimistic outlook for the Indian economy, highlighting its robust recovery and flexibility in the face of the global economy. India has solidified its position as the fastest-growing major economy globally. It is projected to rise to one of the top three economic powers within the next decade or so. This anticipated rise is largely attributed to India's robust democratic framework and strong international partnerships. The economic performance in the first quarter of FY23 was a testament to this growth as it propelled India ahead of the UK to become the fifth-largest economy in the world by marking a significant recovery from the impacts of the COVID-19 pandemic.
The year 2023 was particularly momentous for India as it assumed the presidency of the G20, the premier global economic forum. This role allowed India to demonstrate its economic strength and diplomatic capabilities on an international stage, further solidifying its status as a key player in global economics.
The current state of the Indian economy reflects remarkable resilience. The GDP growth rate for FY 2023-24 is robust at 7.6%, building on a 7% growth rate in FY 2022-23. India's contribution to global economic growth was significant by accounting for 16% of the worldwide increase in 2023, according to sources from PIB India and the World Economic Forum. The International Monetary Fund (IMF) has revised its growth forecast for India in 2024-25 raising it to 6.8% from an earlier projection of 6.5%, driven by strong domestic demand and a growing working-age population. The PHD Chamber of Commerce and Industry (PHDCCI) predicts an even more optimistic growth rate of 8 to 8.3% for the current fiscal year, highlighting the solid growth fundamentals of the Indian economy with an expected average GDP growth rate of 6.7% over the next 23 years.
The construction and manufacturing sectors have significantly contributed to this growth with the former achieving a double-digit growth rate of 10.7% and the latter showing a strong 8.5% growth in FY 2023-24. The surge in private consumption in the first half of FY 2023-24 is the highest since FY15 and has encouraged production activities, thereby resulting in higher capacity utilization across various sectors.
Strengthening Corporate and Bank Balance Sheets
As we move forward, improved balance sheets for corporations and banks are controlled to boost private investment. This positive outlook was highlighted in the recent Economic Survey which emphasized the critical role of financial health in fostering a robust investment climate.
Growth in Household Capital Formation
The Economic Survey also noted a significant uptrend in the residential real estate market. This positive trend indicates a substantial increase in capital formation within the household sector. Essentially, more families are investing in homes which strengthens the overall economic framework.
Managing Inflationary Pressures
Inflationary pressures have been a major concern which is driven by global challenges, supply chain disruptions and unpredictable weather patterns such as the monsoon seasons. However, these pressures have been skillfully managed through a combination of administrative and monetary policy measures. As a result, retail inflation which averaged 6.7 percent in 2022-23 dropped to 5.4 percent in 2023-24. This reduction demonstrates the effectiveness of the policies implemented to control inflation.
Improved Fiscal Balances
Despite significant public investment, the fiscal balances of the general government have shown steady improvement. This progress is attributed to better tax compliance, driven by procedural reforms, controlled expenditure and increased digitization. These factors have helped India achieve a subtle balance in its fiscal management ensuring economic stability while promoting growth.
External Balance and Global Demand
The external balance has faced challenges due to weak global demand for goods. However, this has been largely offset by strong exports in the services sector. The robust performance of services exports has helped maintain a stable external balance by mitigating the adverse effects of inactive global demand for goods.
Improvement in Current Account Deficit
The current account deficit (CAD) showed a significant improvement in the fiscal year 2023-24, reducing to 0.7 percent of GDP from 2.0 percent in 2022-23. This reduction indicates a better balance in the country’s international financial transactions.
Presentation of the Economic Survey
Union Finance Minister Nirmala Sitharaman presented the Economic Survey 2023-24 in Parliament yesterday. This document prepared by the Economic Division of the Department of Economic Affairs under the Ministry of Finance provides a detailed analysis of the economy’s performance and various key indicators for the fiscal year 2023-24 (April-March). It also offers some projections for the current year. The survey is prepared under the supervision of the chief economic adviser, who ensures its thoroughness and accuracy.
Upcoming Union Budget
Today, Hon’ble Finance Minister Sitharaman will present the Union Budget for the fiscal year 2024-25 in Parliament. This budget presentation will mark a significant milestone for her as she will surpass the record of former Prime Minister Morarji Desai. Desai presented five annual budgets and one interim budget between 1959 and 1964 as finance minister. Hon’ble Finance Minister Sitharaman's upcoming budget speech will be her seventh, reflecting her enduring role in shaping the country’s financial policies.
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