The Economic Survey is presented in both the houses of parliament every year one day before the presentation of the Annual Budget. The survey provides information about the state of the economy with the help of several economic indicators. It also forecasts economic activity for the coming year or years. It also outlines the general structure of the Budget document in addition to outlining the Union government’s economic strategy for the coming days. It is a vital document for economists and for all stakeholders having a keen interest in the Indian economy.
The highlights of the survey
First, India is expected to have GDP growth of 6% to 6.8% in FY 2023-24. This depends on the economic and political situations of the world.
Secondly, the Survey 2-23-23 projects a baseline growth of GDP of 6.5% in real terms in FY 223-24. Thirdly, the economy is expected to grow by 7% in real terms for the year ending March 2023. In FY 2021-22, the Indian economy grew at 8.7%. Fourthly, credit growth to the Micro Small and Medium Enterprises (MSME) sector has been over 30.5% on an average during January to November 2022. Fifthly, capital expenditure of the Union government has been increased by 63.4% in the first eight months of FY 23. Sixthly, RBI projects inflation at 6.8% for FY23. The Survey observes that many construction labourers have returned to their sites. This has led to the growth of the construction sector and decline in inventory. Seventhly, high growth of exports in FY 22 and first half of FY 23 has geared the production process. Eighthly, private consumption, which has been a crucial element of Indian economic growth stood at 58.4% in Q2 of FY 22. The survey observes that this has been the highest in Q2 since 2013-14. This has been possible because of rebound in contact-intensive services such as trade, hotels, and transports. Ninthly, the Survey observes that the growth of global trade as forecast by WTO would decline to about 1% in 2023 from 3.5% 2022.
Government is depending on expected high growth
The Indian government has been depending on high growth of GDP. If this happens then the economy will move on the expected path. Earlier, a section of economists was worried about the low consumption expenditure in the economy - both private and government expenditures. This segment is close to 58% of the total expenditure of the economy. But the Survey observes that consumption is not only high but also highest in about a decade. The high capital expenditure from the part of the government will somehow make up for the weak private investment in the economy. Additionally, allocation for the MSME sector will also
increase employment generation.
Headwinds for the economy
First, like FY 22, the agriculture output this year may fall due to unseasonably high temperatures. It may cost a high volume of loss of Rabi crops like wheat, one of the most important crops of the country. Last year the country had to sacrifice about six MT of wheat due to an untimely summer. Secondly, one of the biggest headaches for the economy has been rising inflation. Even the RBI is worried about it. Recently, Jayanta R Verma, Professor of Economics at IIM, Ahmedabad, and a member of the RBI Monetary Policy Committee, reportedly said that the rate of growth which had been experienced at that time, was not at
all stable. How far that would be achievable was doubtful. This was because high interest rates and falling overall demand in many sectors may affect the production of output in the economy. He also pointed out the fact that in that situation, the employment scenario may be worse.
Pranab Sen, former Chief Statistician, Government of India, said a few weeks ago after the Budget presentation that the target of GDP may not be achieved. Rajeswari Sengupta, Associate Professor of Economics, IGIDR, Mumbai, wrote in Indian Express that high capital expenditure might not result in desired “crowding in” of private investment. Secondly, the revenue growth might not be as high as desired. So, the fiscal match of the Budget might not materialise. That might lower the growth of GDP.
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