Economic Survey forecasts GDP growth rate of 6% - 6.8% for FY 24

31 Jan 2023 , 03:19 PM

Economic survey for FY 23 was presented before the Parliament today. The survey expects real GDP growth rate of 7% for FY 23. As per expectations, it has forecasted a GDP growth rate of between 6% – 6.8% for FY 24. This lower GDP projection has been made, keeping in mind the economic slowdown both at the domestic and global level.

Widening current account deficit will put downward pressure on Rupee

The Economic survey has cautioned against the widening Current Account Deficit (CAD). In the September quarter of FY 23, India’s CAD increased to 4.4% of GDP. The Finance Minister said, while presenting the Economic Survey, that a widening CAD will put further downward pressure on the value of rupee. This indicates that in the Budget FY24 tomorrow, the government may impose some tariff and non-tariff barriers to reduce imports of certain items.

Nominal GDP growth forecast of 11% for FY 24

In nominal terms, the economic survey has forecasted a GDP growth of 11%. Nominal GDP is GDP in current year prices. Real GDP is GDP in base year prices. Nominal GDP goes up when there is high inflation and current prices are rising.

Factors that will drive economic growth

The Survey has identified factors that will drive India’s GDP growth rate in FY 24. These factors are higher capital expenditure, increase in private consumption, growth in credit given to small businesses, improvement in corporate balance sheet, and return of migrant workers to cities.

India to be the fastest growing economy in FY 24

The Survey has reiterated that India will remain  the fastest growing economy in the world in FY 24. It said that India has already become the third largest economy in the  world in terms of purchasing power parity (PPP). PPP calculation uses exchange rate that is based on the price of a basket of similar goods in different countries. It does not use the prevailing market exchange rates, while calculating GDP in dollar terms. 

Recovery from Covid lockdowns is almost complete; inflation not a worry

The Survey has said that Indian economy has almost recouped or recovered all that it lost during the years of Covid lockdowns. It says that inflation is not a worry. Consumer Price Inflation is not much above the target range of RBI and is much less than the inflation rate in many other countries. 

Rural development a priority

The Survey has pointed out that PM Gati Shakti Scheme, PLI scheme, National Logistics Policy, and Digital Payments policy have proved to be policies that are driving economic growth. The Survey has said that 65% of Indian population remains in rural areas. 47% of the Indian population is dependent on agriculture as its source of livelihood, the survey claims. The Government therefore  has rural development as its priority. Its strategy for rural development is to focus on improving the quality of life in rural areas. If quality of life is improved in rural areas, then rural development will automatically take place. The Survey implicitly recognizes the need for improving the quality of life in Indian villages.

Agriculture sector is of critical importance

For the agriculture sector, the survey says that it has grown at an average annual rate of 4.6% over the past six years. The Survey attributes this growth to policy measures taken by the Government. These policy measures include increasing productivity of both crops and livestock; higher minimum support prices for some crops;  diversification of crops; increased credit availability for farmers; mechanization; organic farming; and horticulture.

Emergency Credit Linked Guarantee Scheme is helping MSMEs

The Survey also claims that Emergency Credit Linked Guarantee Scheme of the government greatly helped the Small, medium and micro enterprises during Covid lockdowns and restrictions. It says that credit growth to these enterprises increased year-on- year by 30.6% during the period between January and November 2022. 83% of the borrowers under this scheme are micro enterprises. Half of these borrowing micro enterprises have taken a loan of less than Rs 10 lakhs under this scheme. GST paid by MSMEs is also now back to the level before 2020 Covid lockdowns. 

Electronic industry key to manufacturing

The Survey has said that electronics industry is going to be the key to the manufacturing aspirations of the country. Exports of electronic goods stood at $11.6 billion in FY 22. The target is to achieve $120 billion in electronics exports by FY 26. India has now become the second biggest manufacturer of smartphones, globally.