Economic Survey 2023-24 Forecasts Conservative Growth Amidst Global Risks
- ByStartupStory | July 22, 2024
The Economic Survey for the fiscal year 2023-24, presented by the Finance Ministry, has projected a conservative real GDP growth forecast of 6.5-7%, down from last year’s robust 8.2% growth. This forecast reflects a cautious approach amidst global economic uncertainties, despite the market’s anticipation of a higher growth figure.
The survey, supervised by Anantha Nageswaran, Chief Economic Advisor to the Finance Ministry, highlights the government’s decision to adopt a more conservative growth projection. “The Survey conservatively projects a real GDP growth of 6.5-7 per cent, with risks evenly balanced, cognisant of the fact that the market expectations are on the higher side,” stated the 522-page document.
At a press conference following the release, Anantha Nageswaran explained the rationale behind the conservative forecast. “We are not pessimistic. We are actually very optimistic about growth. We are also mindful of the challenges…The way monsoon has progressed and rising global financial markets…such risks,” he said.
Nageswaran further elaborated, “Since January (interim budget) where we were more confident about a 7 per cent growth, the global economy has become even more polarised. Financial market valuations are now elevated. Given that we still feel 7 per cent is doable, but yet we want to be not necessarily cautious but somewhat prudent in projecting. We would rather be pleasantly surprised than being disappointed. That is why we are projecting 6.5-7 per cent.”
The survey noted that inflation remains under control and emphasized that the economy is on a strong footing. The report highlighted the Government’s focus on capital expenditure and the sustained momentum in private investment as key factors boosting capital formation growth. However, it also warned of potential caution in private capital formation, despite strong growth in recent years.
The Finance Ministry’s forecast is lower than the 7.2% GDP growth projection made by the Reserve Bank of India (RBI) in June. Earlier this year, the Finance Ministry’s interim budget report had estimated a growth close to 7% for 2024-25.
The Economic Survey’s forecast aligns closely with the International Monetary Fund’s (IMF) recent estimate of 7% growth for the current fiscal year. The survey also underscored the Indian economy’s recovery post-pandemic, noting that real GDP in 2023-24 is 20% higher than its level in 2019-20.
On fiscal consolidation, the Survey anticipates a reduction in the fiscal deficit to 4.5% of GDP or lower by FY2025-26. The document also addressed inflation outlooks, indicating a benign short-term perspective but suggesting a review of the consumer price index for long-term price stability.
Despite a core inflation rate around 3%, the RBI has maintained interest rates unchanged at 6.5% for eight consecutive meetings. The Survey highlighted that the anticipated easing of rates has been delayed, partly due to rising food inflation.
The Finance Ministry’s growth strategy for the “Amrit Kaal” focuses on six critical areas: boosting private investment, expanding MSMEs, utilizing agriculture as a growth engine, green transition financing, bridging the education-employment gap, and enhancing State capacity and capability.
The Economic Survey also observed that inflationary pressures have moderated globally, with declining commodity prices and easing supply chain issues. However, core inflation remains persistent, driven by high service inflation. The survey noted potential for central banks to cut rates if services inflation moderates, which could influence policy easing cycles globally.
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