GDP projection 6.5%, capex to push growth

Tribune News Service

Sandeep Dikshit

New Delhi, January 31

India will have to brace for around 6.5 per cent growth with the Economic Survey projecting the GDP growth in the range of 6 per cent to 6.8 per cent in 2023-24, depending on the trajectory of economic and political developments globally.

Economic Survey India likely to remain fastest-growing major economy in world

Major challenges Current account deficit, depreciating rupee and global slowdown

In contrast, the economy is expected to grow at 7 per cent in 2022-23 and 8.7 per cent in 2021-22. However, the survey took comfort from an IMF report that said India would regain its position as the fastest-growing major economy in FY23 and FY24.

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Inflation: Borrowing cost to remain higher

Borrowing cost may remain ‘higher for longer’, entrenched inflation may prolong tightening cycle

Credit growth high

Credit growth to the MSME sector has been remarkably high, over 30.5% during Jan-Nov 2022

Capital expenditure

Capex, which increased by 63.4% in the first 8 months of FY 23, was another growth driver of the Indian economy

Current account deficit may widen

• Current account deficit (CAD) may continue to widen as global commodity prices remain elevated
• Rupee may come under pressure if current account deficit widens

Fiscal position

• Govt’s finances have shown a resilient performance, buoyancy in revenue from direct taxes & GST

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Key indicators

Rs 17.81 lakh cr gross tax revenue in current fiscal till November

26% growth in direct taxes, which account for half of the gross tax revenue

Rs 7.5 lakh cr capital expenditure target for the fiscal year 2022-23 to be met

7.2% jobless rate in July-September 2022, down from 8.3% in 2019

9% rise in exports, 24.96% in imports during April-December this fiscal

The survey that detailed the state of the economy was tabled in Parliament by Finance Minister Nirmala Sitharaman a day before she presents Union Budget 2023-24. It said India’s growth was expected to remain robust and the country would remain the fastest-growing major economy in the world as it fared better in dealing with the extraordinary set of global challenges.

The 6-6.8 per cent growth projection was premised on the likely rebound of private consumption, higher capital expenditure, near-universal vaccine coverage, strengthening of the balance sheets of corporates and banks and credit growth, the survey said. It expected growth to be powered by vigorous credit disbursal, expansion of public digital platforms and measures such as PM Gati Shakti, National Logistics Policy and Production-Linked Incentive (PLI) schemes.

Coming to the current fiscal, the survey said the economic growth was principally led by private consumption and capital formation. This helped generate employment leading to a fall in the urban unemployment rate and faster net addition in the Employees’ Provident Fund.

But reflecting Sitharaman’s earlier complaint against the private sector, the survey wanted private capex to “take up the leadership” role and put job creation on a fast track. India maintained a decent growth rate also because of limited health and economic fallout of renewed Covid infections in China and cessation of monetary tightening in advanced economies, which led to a return of capital flows to India.

The survey lauded the 30.6 per cent rise in credit growth to the micro, small, and medium enterprises (MSMEs) during January-November 2022, which was underpinned by the Centre’s Emergency Credit Linked Guarantee Scheme (ECLGS) that eased their debt servicing concerns.

Banks were able to disburse more credit because other alternatives such as bond markets were volatile and external commercial borrowings carried high interest rates. If inflation declines and the real cost of credit doesn’t rise, credit will remain brisk in FY24 as well.

The Centre’s capital expenditure, which increased by 63.4 per cent in the first eight months of FY23 was another growth driver. The survey hoped for a turnaround in private capex due to the strengthening of balance sheets of corporates which would lead to an increase in credit financing.

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