India's GDP is projected to grow at 6.5% to 7% in the current fiscal year, according to the Economic Survey for 2023-24 which was tabled in Lok Sabha today.

This growth rate is lower than the Reserve Bank of India’s forecast of 7.2% but is in line with the 7% estimate made by the International Monetary Fund (IMF) and the Asian Development Bank (ADB). The GDP for 2024 is pegged at 8.2%.

While merchandise and services exports are expected to see an uptick in FY25, rural demand is likely to see a pickup on the back of a normal rainfall forecast. The survey has also said that structural reforms like the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC) have “matured” and are “delivering envisaged results”.

The survey, however, has cautioned that any escalation of geopolitical conflicts in 2024 may lead to “supply dislocations, higher commodity prices, reviving inflationary pressures and stalling monetary policy easing with potential repercussions for capital flows”. 

According to the survey, private capital formation may turn slightly more cautious because of fears of cheaper imports from countries with excess capacity.

"Considering these factors, the survey conservatively projects real GDP growth of 6.5–7 per cent, with risks evenly balanced, cognizant of the fact that market expectations are on the higher side," it said.

The Economic Survey also said that the current GDP level is close to the pre-pandemic trajectory in Q4FY24.

The other key highlights of the survey are:

Banking sector 

India’s banking and financial sectors showed strong performance in FY24.

"Double-digit and broad-based growth in bank credit, gross and net non-performing assets at multi-year lows, and improvement in bank asset quality highlight the government’s commitment to a healthy and stable banking sector,"  the survey said.

Capital formation

According to the survey, primary capital markets facilitated capital formation of Rs 10.9 lakh crore in FY24. This is approximately 29% of the gross fixed capital formation of private and public corporates during FY23. 

India’s market capitalisation to GDP ratio has become the fifth largest in the world.

Food inflation 

Food prices have gone up over the last two years due to extreme weather, depleted reservoirs and crop damage. The production of vegetables and pulses were particularly impacted on account of harsh weather conditions.

Food inflation rose to 7.5% in FY24 from 6.6% a year ago, the survey said.

Core inflation

In FY24, retail inflation was maintained at 5.4%, the lowest level since the pandemic. Core services inflation eased to a nine-year low in FY24. Core goods inflation also fell to a four-year low.

Long-term strategy for inflation

While the short-term short-term inflation outlook looked benign, the survey stressed the need for long-term policy stability by increasing the production of major oilseeds, expanding the area under pulses and assessing the progress in developing modern storage facilities for specific crops.

For meeting the needs of the growing workforce, the Indian economy needs to generate an average of nearly 78.5 lakh jobs annually in the non-farm sector until 2030.

The survey also noted that not all of working age will seek jobs; some will opt for self-employment or entrepreneurial roles.

China

India needed to deftly handle its relationship with China. According to the survey, increased foreign direct investment (FDI) inflows from China can boost India’s global supply chain participation and boost exports. 

IT hiring 

Hiring in the information technology (IT) sector has slowed down in FY24. The survey said that even if it may not decline further this year, "it is unlikely to pick up significantly."

Trade deficit

The trade deficit in FY24 was lower compared to FY23, with the current account deficit around 0.7% of GDP.