The Economic Survey 2022-23, the annual report card on the health of the economy, painted a rosy picture with a projected GDP growth of 6.5% for FY24 after having staged a full recovery from the scars of the Covid-19 pandemic.

The government spending, incipient signs of private capex, stronger corporate balance sheets, healthier banks and reining in inflation are the puffs that the survey is banking on when it adds a further cheer, saying that the actual growth could be in the range of 6% to 6.8%.

“The Indian economy, however, appears to have moved on after its encounter with the pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to ascend to the pre-pandemic growth path in FY23,” the survey, released today by the government said. a day ahead of the Union Budget presentation, said.

The survey projected a baseline GDP growth of 6.5% in real terms in FY24, giving a growth band of 6% to 6.8%. “The projection is broadly comparable to the estimates provided by multilateral agencies such as the World Bank, the IMF and the ADB and, domestically, by the Reserve Bank of India (RBI). The actual outcome for real GDP growth will probably lie in the range of 6% to 6.8%, depending on the trajectory of economic and political developments globally,” the Economic Survey, released a day ahead of the Union Budget presentation, said.

The survey drew an analogy from the period 1998 to 2002 when economic liberalisation was unveiled and the growth had lagged due to a temporary shock in the economy.

“Similarly, in the present decade, the presence of strong medium-term growth magnets gives us optimism and hope that once these global shocks of the pandemic and the spike in commodity prices in 2022 fade away, the Indian economy is well placed to grow faster in the coming decade,” the survey surmised.

With improved and healthier balance sheets of the banking, non-banking and corporate sectors, a fresh credit cycle has already begun, evident from the double-digit growth in bank credit over the past few months. Additionally, the economy has started benefiting from the efficiency gains resulting from greater formalisation, higher financial inclusion, and economic opportunities created by digital technology-based economic reforms. Thus, India’s growth outlook seems better than in the pre-pandemic years, and the Indian economy is prepared to grow at its potential in the medium term.

 The survey said that the upside to India’s growth outlook arises from:

(i)limited health and economic fallout for the rest of the world from the current surge in Covid-19 infections in China and, therefore, continued normalisation of supply chains; (ii) inflationary impulses from the reopening of China’s economy turning out to be neither significant nor persistent; (iii) recessionary tendencies in major advanced economies (AEs) triggering a cessation of monetary tightening and a return of capital flows to India amidst a stable domestic inflation rate below 6%; (iv) this leads to an improvement in animal spirits and provides further impetus to private sector investment.

It lauded the measures taken by the government and the RBI, which finally managed to bring retail inflation below the central bank’s upper tolerance target in November 2022.

The capital expenditure (capex) of the central government, which increased by 63.4% in the first eight months of FY23, was another growth driver of the Indian economy in the current year, crowding in the private capex since the January-March quarter of 2022. On current trend, it appears that the full year’s capital expenditure budget will be met. A sustained increase in private capex is also imminent with the strengthening of the balance sheets of the corporates and the consequent increase in credit financing it has been able to generate.

The fiscal deficit of the Union Government, which reached 9.2% of GDP during the pandemic year FY21, has moderated to 6.7% of GDP in FY22 and is further budgeted to reach 6.4% of GDP in FY23. This gradual decline in the Union government's fiscal deficit as a per cent of GDP, in line with the fiscal glide path envisioned by the government, is a result of careful fiscal management supported by buoyant revenue collection over the last two years, the survey said.

India’s economic growth in FY23 has been principally led by private consumption and capital formation. It has helped generate employment, as seen in the declining urban unemployment rate and in the faster net registration in Employee Provident Fund (EPF).

The survey also put the onus on the private capex which, it said, needs to take the leadership role to put job creation on a fast track. Recovery of MSMEs is proceeding apace, as is evident in the amounts of Goods and Services Tax (GST) they pay, while the Emergency Credit Line Guarantee Scheme (ECLGS) is easing their debt servicing concerns.

The survey said that the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been directly providing jobs in rural areas and indirectly creating opportunities for rural households to diversify their sources of income generation. Schemes like PM-Kisan and PM Garib Kalyan Yojana have helped in ensuring food security in the country, and their impact was also endorsed by the United Nations Development Programme (UNDP). The results of the National Family Health Survey (NFHS) also show improvement in rural welfare indicators from FY16 to FY20, covering aspects like gender, fertility rate, household amenities and women empowerment.