Advertisement

Updated January 31st, 2023 at 20:24 IST

Growing GDP, MSME surge, release of pent-up demand: Economic Survey paints a rosy picture

Finance Minister Nirmala Sitharaman tabled the Economic Survey 2023 on Tuesday, a day ahead of presenting the Union Budget in Parliament.

Reported by: Megha Rawat
Economic Survey 2023
Top 10 highlights of Economic Survey 2023 (Image: Twitter/ANI) | Image:self
Advertisement

The Economic Survey 2023 was tabled in Parliament by Finance Minister Nirmala Sitharaman on January 31, Tuesday. The survey pegs India's GDP growth for the next 2023-24 fiscal year in the 6-6.8% range. The survey has projected a baseline GDP growth of 6.5% in real terms in FY24. 

GDP Growth 

According to the Economic Survey, India will be witnessing a GDP growth of 6.0 percent to 6.8 percent in financial year 2023-24, depending on the trajectory of economic and political developments globally. The Reserve Bank of India (RBI) has forecast a 6.8% growth in FY23 while the World Bank has pegged it at 6.9%. The Economic Survey says that in real terms, the nation's economy is expected to grow at 7 percent for the year ending March 2023 following an 8.7 percent growth in the previous financial year. 

The Survey said, "IMF estimates India to be one of the top two fast-growing significant economies in 2022. Despite strong global headwinds and tighter domestic monetary policy, if India is still expected to grow between 6.5 and 7.0 per cent, 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-energise the growth drivers of the economy."

Micro, Small, and Medium Enterprises (MSME) sector witnesses surge

The credit growth to the Micro, Small and Medium Enterprises (MSME) sector has been remarkably high, over 30.6 per cent, on average during January - November 2022. The sector was supported by the extended Emergency Credit Linked Guarantee Scheme (ECLGS) of the Union government.

The survey adds, "The recovery of MSMEs is proceeding apace, as is evident in the amounts of Goods and Services Tax (GST) they pay, while the Emergency Credit Linked Guarantee Scheme (ECGLS) is easing their debt servicing concerns. Increase in the overall bank credit has also been influenced by the shift in borrower’s funding choices from volatile bond markets, where yields have increased, and external commercial borrowings, where interest and hedging costs have increased, towards banks. If inflation declines in FY24 and if the real cost of credit does not rise, then credit growth is likely to be brisk in FY24."

Growth driven by increase in Capital Expenditure (CAPEX)

CAPEX- the Capital Expenditure of the central government which remarkably increased by 63.4 percent in the first eight months of FY23 was another growth driver of the Indian economy in the current year, according to the Economic Survey 2023. Notably, the capex thrust in the last two budgets of the Government of India was not an isolated initiative meant only to address the infrastructure gaps in the country. It was part of a strategic package aimed at crowding-in private investment into an economic landscape broadened by the vacation of non-strategic PSEs (disinvestment) and idling public sector assets.

Three developments support this:

  • The significant increase in the Capex budget in FY23, as well as its high rate of spending. 
  • Direct tax revenue collections have been highly buoyant, and so have GST collections, which should ensure the full expending of the Capex budget within the budgeted fiscal deficit. The growth in revenue expenditure has also been limited to pave the way for higher growth in Capex. 
  • The pick-up in private sector investment since the January-March quarter of 2022.

Vaccinations facilitating the return of migrant workers to construction sites

According to the survey, vaccinations have facilitated the return of migrant workers to cities to work in construction sites as the rebound in consumption spilled over into the housing market. This is evident in the housing market witnessing a significant decline in inventory overhang to 33 months in Q3 of FY23 from 42 months last year.

Schemes create opportunities for rural households to diversify sources of income

According to the survey, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been directly providing jobs in rural areas and indirectly creating opportunities for rural households to diversify their sources of income generation.

Schemes like PM-Kisan and PM Garib Kalyan Yojana have helped in ensuring food security in the country, and their impact was also endorsed by the United Nations Development Programme (UNDP). The results of the National Family Health Survey (NFHS) also show improvement in rural welfare indicators from FY16 to FY20, covering aspects like gender, fertility rate, household amenities, and women empowerment.

Private consumption rebounding

The survey highlighted that the manufacturing and investment activities in India consequently gained traction and by the time the growth of exports moderated, the rebound in domestic consumption had sufficiently matured to take forward the growth of India’s economy.

Private Consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY23, the highest among the second quarters of all the years since 2013-14, supported by a rebound in contact-intensive services such as trade, hotel and transport, which registered sequential growth of 16 per cent in real terms in Q2 of FY23 compared to the previous quarter.

Finances of the public sector banks witness a significant turnaround

As per the data on non-financial debt from the Bank for International Settlements, in the course of the last decade, Indian non-financial private sector debt and non-financial corporate debt as a share of GDP declined by nearly thirty percentage points.

"The banking sector in India has also responded in equal measure to the demand for credit as the Year-on-Year growth in credit since the January-March quarter of 2022 has moved into double-digits and is rising across most sectors," the survey said. The finances of the public sector banks have seen a significant turnaround, with profits being booked at regular intervals and their Non-Performing Assets (NPAs) being fast-tracked for quicker resolution/liquidation by the Insolvency and Bankruptcy Board of India (IBBI).

Notably, RBI has projected headline inflation at 6.8 per cent in FY23, which is outside its target range. At the same time, it is not high enough to deter private consumption and also not so low as to weaken the inducement to invest.

Six challenges faced by the Global Economy

The survey mentioned global economy battles by narrating six challenges. The three challenges like COVID-19-related disruptions in economies, the Russian-Ukraine conflict and its adverse impact along with disruption in supply chain, mainly of food, fuel and fertilizer. 

The fourth challenge emerged as faced with the prospects of global stagflation, nations, feeling compelled to protect their respective economic space, thus slowing cross-border trade and affecting overall growth. The fifth challenge was festering as China experienced a considerable slowdown induced by its policies. The sixth medium-term challenge to growth was seen in the scarring from the pandemic brought in by the loss of education and income-earning opportunities.

Release of pent-up demand

The survey pointed out another recovery and added that the “release of pent-up demand” was reflected in the housing market as demand for housing loans picked up. Consequently, housing inventories have declined, prices are firming up, and construction of new dwellings is picking up pace and this has stimulated innumerable backward and forward linkages that the construction sector is known to carry.

"The universalisation of vaccination coverage also has a significant role in lifting the housing market as, in its absence, the migrant workforce could not have returned to construct new dwellings. Apart from housing, construction activity, in general, has significantly risen in FY23 as the much-enlarged capital budget (Capex) of the central government and its public sector enterprises is rapidly being deployed," the survey mentioned. 

Structural reforms enhanced the efficiency of the economy

The survey tabled by the Finance Minister mentioned that the budgeted capital expenditure rose 2.7 times in the last seven years, from FY16 to FY23, re-invigorating the Capex cycle. The survey said that structural reforms such as the introduction of the Goods and Services Tax and the Insolvency and Bankruptcy Code enhanced the efficiency and transparency of the economy and ensured financial discipline and better compliance.

Advertisement

Published January 31st, 2023 at 20:24 IST

Your Voice. Now Direct.

Send us your views, we’ll publish them. This section is moderated.

Advertisement
Advertisement

Trending Quicks

former dsp shailendra singh revealed criminal activity of Mukhtar Ansari
a few seconds ago
TCS 'cash for jobs' scam
3 minutes ago
IBL Finance IPO
7 minutes ago
Congress Press Conference
7 minutes ago
Virat Kohli keeps a close watch on Gautam Gambhir
9 minutes ago
Lok Sabha Elections 2024 LIVE
13 minutes ago
Good Friday
14 minutes ago
Life Insurance Corporation
14 minutes ago
Kerala Nirmal Lottery Sambad Friday Result
19 minutes ago
US Federal Reserve
21 minutes ago
Airbrush Brow Trend: Know Its Benefits, Procedure, And More
24 minutes ago
Advertisement
Advertisement
Advertisement
Whatsapp logo