ECONOMIC SURVEY 2023
1. Context
On Tuesday, the government tabled the Economic Survey 2022-23. The Survey laid out the outlook for India’s growth, inflation, and unemployment in the coming years.
2. What is Economic Survey?
- Economic Survey is an annual document of the Ministry of Finance. It reviews the economic progress of the country and issues in the last 12 months. The survey provides information related to the performance of key developmental schemes launched by the government. The document also explains the performance of major government policies and their impact.
- The Economic Survey discusses major fiscal developments, macroeconomic factors, inflation, and other economic factors. The document also highlights the impact of agriculture, climate change, and employment on the economy of the country.
- The 1st Economic Survey was tabled in 1950-51. However, till the year 1964, it was presented along with the budget.
3. Key takeaways from this year
3.1 GDP growth
The Survey said India’s growth estimate for FY23 is higher than for almost all major economies. Despite strong global headwinds and tighter domestic monetary policy, if India is still expected to grow between 6.5 and 7.0 percent, and that too without the advantage of a base effect, it is a reflection of India’s underlying economic resilience; of its ability to recoup, renew and re-energize the growth drivers of the economy.
3.2 Inflation
The RBI has projected headline inflation at 6.8% in FY23, outside its comfort zone of 2% to 6%. High inflation is seen as one big factor holding back demand among consumers.
However, the Survey sounded optimistic about the inflation levels and trajectory, saying “it is not high enough to deter private consumption and also not so low as to weaken the inducement to invest.”
3.3 Unemployment
- It pointed to the Periodic Labour Force Survey (PLFS), which showed that urban the unemployment rate for people aged 15 years and above declined from 9.8% in the quarter ending September 2021 to 7.2% one year later.
- The Survey also underlined that the fall in the unemployment rate is accompanied by an improvement in the labor force participation rate.
- The employment levels have risen in the current financial year”, and that “job creation appears to have moved into a higher orbit with the initial surge in exports, a strong release of the “pent-up” demand, and a swift rollout of the capex.”
4. Projections for 2023-24
The Survey projected a baseline GDP growth of 6.5% in real terms in FY24. However, it detailed some downside risks. For instance, low demand for Indian exports, thanks to poor global growth, may widen India’s trade deficit and make the rupee depreciate. Similarly, sustained monetary tightening (higher interest rates) may drag down economic activity in FY24.
5. Factors that push India's GDP Growth Rate
- Credit growth to the micro, small, and medium enterprises (MSME) sector has been remarkably high, over 30.5 percent, on average during Jan-Nov 2022.
- Capital expenditure (CAPEX) of the central government, which increased by 63.4 percent in the first eight months of FY 2022-23, was another growth driver of the Indian economy in the current year.
6.Outlook for 2023-24
The Survey projected a baseline GDP growth of 6.5% in real terms in FY24
Low demand for Indian exports, thanks to poor global growth, may widen India’s trade deficit and make the rupee depreciate
Similarly, sustained monetary tightening (higher interest rates) may drag down economic activity in FY24
7.What is it for Indian Economy
According to the survey
- India’s economy has recovered from the Covid disruption and, at long last, is poised to see sustained robust growth in the rest of the decade.
- As the health and economic shocks of the pandemic and the spike in commodity prices in 2022 wear off, the Indian economy is thus well placed to grow at its potential in the coming decade, similar to the growth experience of the economy after 2003
- This is the primary reason for expecting India’s growth outlook to be better than it was in the pre-pandemic years
- The situation in 2023 is similar to how the economy was poised in 2003, the period between 2014 and 2022 is analogous to 1998-2002, when despite transformative reforms by the government (also led by the BJP), the Indian economy lagged growth returns
- This was due to temporary shocks such as the US sanctions after India’s nuclear test, two successive droughts, the collapse of the tech boom, etc. But once these shocks faded, the structural reforms paid growth dividends from 2003
- The first thing to note is that even before Covid, India’s potential growth rate that rate at which it can grow without inflation becoming a problem had fallen to just 6%, it was 8% between 2003 and 2008, It was 7% between 2009 and 2015
- In the next few years, it is unlikely to rise much above 6%. Secondly, during the 2003-2008 phase, the global economy was booming the exactly opposite of the situation now
- Unemployment rates underestimate the alarming stress in the labour market, because labour force participation rate (or the proportion of people demanding jobs) is itself quite low
- Moreover, over the past two decades, India’s growth has become increasingly capital-intensive (using relatively less labour). This trend is likely to worsen as automation eats into routine jobs
- Widespread joblessness translates to lower incomes and lower consumer demand. That, in turn, dissuades private sector investments and eventually acts as a drag on economic growth
- India is the world’s most populous country with a growing youth bulge
- India has the world’s largest pool of poor people and the largest pool of malnourished children
- Given the low levels of per capita income, it requires much faster growth than many developed countries
- A growth rate of 4% in India can feel like a recession and even though a 6% growth should be achievable, it may not create enough jobs to satisfy a growing population
6. Economic Survey 2022-23
For Prelims
| For Prelims: GDP growth, Inflation, Unemployment, Micro, small, and medium enterprises (MSME), Capital expenditure (CAPEX), Periodic Labour Force Survey (PLFS), Ministry of Finance. |
Source: The Indian Express
