Aided by the pickup in capital investment and solid domestic demand, the Indian economy is projected to grow 6-6.8 per cent in 2023-24, the Economic Survey for 2022-23 said on Tuesday.

The baseline growth for 2023-24 has been pegged at 6.5 per cent in real terms, the Survey showed even as it asserted that incipient signs of a new private sector capital formation cycle are visible.

India’s full recovery from the pandemic is now complete and the country is positioning itself to ascend to the pre-pandemic growth path, the Survey said. It also highlighted the role of vaccination in pushing economic activity.

It noted that private capex soon needs to take up a “leadership role” to put job creation on a fast track in the country. It was the budgeted capital expenditure — which rose 2.7x in the last seven years from FY16 to FY23 — that reinvigorated the capex cycle, the Survey pointed out.

Facing numerous hurdles

The latest edition of the Economic Survey, which was tabled on Tuesday in Lok Sabha by Finance Minister Nirmala Sitharaman, highlighted the economy’s resilience in the current fiscal in withstanding global shocks such as the Russia-Ukraine conflict without losing growth momentum even as it flagged the global economic situation as a key risk factor for its FY23-24 growth forecast.

It highlighted that this projected growth range of 6-6.8 per cent is dependent on the trajectory of economic and political developments globally. The latest Survey comes amid a challenging backdrop as recessionary fears take centre stage globally and higher interest rates at home temper domestic demand.

The Survey has come a day before Sitharaman presents her last full-fledged budget of this government on Wednesday, ahead of the general elections in 2024 and during the current year when as many as nine States are going to polls.

The GDP growth projection for India is broadly comparable to the estimates provided by multilateral agencies such as the World Bank, the IMF, and the ADB and by RBI domestically, the Survey noted.

Fastest-growing economy

Even by this growth projection of between 6-6.8 per cent for 2023-24, the Indian economy will continue to retain the tag of the fastest-growing large economy in the world, said economy watchers.

For the current fiscal (2022-23), the Survey has pegged economic growth at 7 per cent. This follows an 8.7 per cent growth in the previous fiscal.

“Despite the three shocks of Covid-19, the Russian-Ukraine conflict and the central banks across economies led by the Federal Reserve responding with synchronised policy rate hikes to curb inflation, leading to an appreciation of US dollar and the widening of current account deficit in net importing economies, agencies worldwide continue to project India as the fastest growing major economy at 6.5-7 per cent in 2022-23,” the Survey highlighted.

As for the factors that present an upside to India’s growth outlook, the survey listed the following reasons:
  • (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 triggering a cessation of monetary tightening and a return of capital flows to India amidst a stable domestic inflation rate below 6 per cent.
  • (iv) This leads to an improvement in animal spirits and provides further impetus to private-sector investment.