Economic Survey 2023-24: India’s GDP Growth Predicted at 6.5-7%, Inflation Projected at 4.5% by RBI

Ira Singh
Khabar Khabaron Ki,22 July’24

Union Finance Minister Nirmala Sitharaman presented the Economic Survey 2023-24 on Monday, which estimates a real GDP growth between 6.5 and 7 percent. The report additionally states that the Reserve Bank of India (RBI) anticipates inflation at 4.5 percent in FY25 and 4.1 percent in FY26.

The Economic Survey 2023-24, unveiled by Finance Minister Nirmala Sitharaman, showcases India’s economic strength despite global uncertainties. It highlights a continuous post-pandemic recovery, stable inflation, and a favorable investment climate supported by public and private sectors. The survey stresses the need for persistent domestic efforts to maintain growth and underscores the significance of a collaborative effort among the government, private sector, and public. It further indicates that the implementation of structural reforms such as GST and the Insolvency and Bankruptcy Code (IBC) has reached maturity and is showing positive results. The Survey anticipates growth in merchandise and service exports and points out that the IMD’s forecast for normal rainfall and the satisfactory progress of the southwest monsoon are expected to improve agricultural sector performance and strengthen rural demand. Though it warns that any escalation of geopolitical conflicts in 2024 could disrupt supply chains, drive up commodity prices, reignite inflationary pressures, and impede monetary policy easing

The survey projects that India will need substantial job creation up to 2036 to accommodate its expanding workforce, underscoring the importance of strategic planning in employment generation. With the upcoming budget, Sitharaman will surpass the record for the most budget presentations by a finance minister.

Monsoon session begins today and will have 19 sittings till August 12 when the government is expected to present six bills, including the one to replace the 90-year-old Aircraft Act, and also get Parliament’s nod for the budget of Jammu and Kashmir, which is under central rule.

Meanwhile, Chief Economic Advisor V. Anantha Nageswaran expressed the government’s confidence in meeting the 7 percent growth target outlined in the Economic Survey 2023-24, which was presented on July 22. Speaking on Monday, Nageswaran reportedly acknowledged that while achieving this target is feasible, there are several potential risk factors to consider.”While 7 per cent is eminently doable, there are some risk factors given the way the monsoon has shaped up and financial markets risks are rising in the developed world with spillover effects on India and the geopolitical environment,” Nageswaran said. In April, we commenced a new financial year. In May, we learnt that the Indian economy is estimated to have grown 8.2 per cent in real terms in FY24. In June, a new government took office,” Nageswaran said in the preface of the report

Indian Economy (2023-24):Key Highlights

The Economic Survey’s growth projection is either lower or in line with the estimates of major organizations. Last month, the Reserve Bank of India (RBI) raised the GDP growth forecast for the current fiscal year to 7.2 percent, up from its earlier estimate of 7 percent. The International Monetary Fund (IMF) and the Asian Development Bank (ADB) have both pegged India’s GDP growth for 2024-25 at 7 percent. According to the Economic Survey, private capital formation, which has seen robust growth over the past three years, may become slightly more cautious due to concerns about cheaper imports from countries with excess capacity. The survey also noted that while merchandise exports are expected to rise with improving growth prospects in advanced economies, services exports are likely to see further growth.

●The World Economic Outlook’s April report indicates a global economic growth rate of 3.2% for 2023, with significant differences in growth patterns among nations. The stark difference in the growth performance of countries has been on account of domestic structural issues, uneven exposure to geopolitical conflicts and the impact of monetary policy tightening.

●India’s economy sustained the momentum from FY23 into FY24, overcoming various external challenges. Real GDP growth reached 8.2% in FY24, surpassing the 8% mark in three of the four quarters. The emphasis on macroeconomic stability played a crucial role in minimizing the impact of external challenges on India’s economy.

●The government’s emphasis on capital expenditure, along with ongoing private investment momentum, has significantly enhanced capital formation growth. In real terms, Gross Fixed Capital Formation rose by 9% in 2023-24. Looking ahead, stronger corporate and bank balance sheets are expected to further bolster private investment. The upward trends in the residential real estate market suggest a substantial increase in household sector capital formation.

● Inflationary pressures stoked by global troubles, supply chain disruptions, and vagaries of monsoons have been deftly managed by administrative and monetary policy responses. As a result, after averaging 6.7 per cent in FY23, retail inflation declined to 5.4 per cent in FY24.

●The improved fiscal balances for the general government have been achieved despite a rise in public investment. This positive outcome is largely due to enhanced tax compliance through procedural changes, controlled spending, and increased digitization.

● The external balance faced pressure from weak global demand for goods; however, robust services exports largely offset this impact. Consequently, the Current Account Deficit (CAD) decreased to 0.7% of GDP in FY24, a significant improvement from the 2.0% deficit in FY23.

●The Indian economy has rebounded and grown steadily after the pandemic, with FY24 real GDP surpassing its FY20 level by 20%. This achievement is notable among major economies. The outlook for FY25 remains positive, provided geopolitical, financial, and climatic uncertainties are managed effectively.

The government remains optimistic about reaching the growth target but is aware of these challenges, including variable weather patterns, increasing financial market uncertainties in developed economies, and geopolitical complexities.