The economic survey for FY23 signaled the Indian economy’s complete recovery from the Covid-19 pandemic but still estimated growth to be between 6-6.8 per cent — lowest in three years — mainly on account of global slowdown that is likely to affect exports.

The survey, tabled in both Houses of Parliament on Tuesday by Finance Minister Nirmala Sitharaman, estimated a growth rate of 6.5-7 per cent during the remaining years of the current decade.

The economy recorded a growth rate of 8.7 per cent in 2021-22 (mainly on account of distorted growth number in FY20) and was estimated to grow at 7 per cent in FY23.

For FY24, baseline real growth rate has been projected at 6.5 per cent while nominal growth rate (after factoring inflation rate) is projected at 11 per cent, the survey revealed. This is the first state of the economy report prepared under the leadership of Chief Economic Advisor V Anantha Nageswaran.

Risks elevated

The survey said with inflation persisting in the advanced economies and central banks hinting at further rate hikes, downside risks to the global economic outlook appear elevated.

“... 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,” it said.

However, it sounded a note of caution about headwinds by underlining that in the current year, India too has faced the challenge of reining in inflation that the Russia-Ukraine war had accentuated.

The CEA, addressing a press conference later, projected a potential growth rate of 6.5-7 per cent for the remaining years in this decade.

While conceding that the economy may face headwinds emanating from geopolitical disruptions, he said a modest slowdown in global growth would in fact, be beneficial for India as it can bring down commodity prices and ease inflation concerns.

“My optimism is that in the rest of the decade, the potential GDP growth, without taking into account export potential, would be around 6.5 to 7 per cent, rather than between 6 per cent and 6.5 per cent,” he said.

On inflation, the survey said it was not high enough to deter private consumption nor low enough to weaken investment. Retail inflation based on consumer price index (CPI) has remained above the targeted range of 2-6 per cent through much of 2022-23 with an annual projection of over 6 per cent.

‘Brisk’ demand

The survey maintained that demand in the economy will remain ‘brisk’ in the next fiscal as “a vigorous credit disbursal and capital investment cycle is expected to unfold in India with the strengthening of the balance sheets of the corporate and banking sectors.”

However, domestic demand will come with some concerns as a strong domestic economy would support imports while exports were expected to ease due to weakness in foreign markets — this means the current account deficit could widen.

According to Nageswaran, improved public digital infrastructure and a turn in the financial cycle, with the deleveraging of banks and corporate balance sheets will add to India‘s potential growth.

“This will add 50-100 basis points to India‘s trend growth over the medium term above the 6 per cent trend assumed by many forecasters,” he said.

On track

The survey mentioned that the government is on track to meet its fiscal deficit target of 6.4 per cent for FY23 as well as its medium-term fiscal goal, the survey said. In the last Budget, the government had planned to bring down the fiscal deficit to 4.5 per cent by 2025-26.

CEA declines to comment on Adani controversy

Nageswaran refused to comment on the impact of the rout in Adani Group shares following a report by US based Hindenburg Research.

“We don’t comment on a single company in the economic survey,” he said. “Corporate sector as a whole has deleveraged and balance sheets are healthy. So, what happens to one particular corporate group is a matter between markets and the corporate group,” he said.