What’s in today’s article?
- Why in news?
- What is the Economic Survey?
- Economic Survey 2023: Key Takeaways
- Sectoral pointers from Economic Survey 2023
- Suggestions given by Economic Survey 2023
Why in News?
- On 31 January, 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.
What is the Economic Survey?
- The Economic Survey of India is an annual report released by the Finance Ministry. It details the state of the economic performance of the country in the past year.
- The survey highlights macroeconomic figures and economic progress of the country.
It also mentions the possible economic challenges that India might face in future and suggests measures to overcome them.
- The survey is prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance under the supervision of the Chief Economic Advisor of India (CEA).
- The Economic Survey of India is presented every year a day before the Union Budget is announced.
- This year’s survey was presented by the CEA V Anantha Nageswaran on January 31, after being tabled by Finance Minister in the parliament.
Economic Survey 2023: Key Takeaways
- GDP growth
- The Survey said India’s growth estimate of 7% for FY23 is higher than for almost all major economies.
- It projected the economy to grow by somewhere between 6% and 6.8%, depending on global factors in 2023-24, with 6. 5% a baseline expectation.
- Despite global uncertainties and slowing world economy, India’s growth is supported by solid domestic demand and a pickup in capital investment.
- India’s projected growth rate, that too without the advantage of a base effect, is a reflection of India’s underlying economic resilience.
- Indian economy in 2022-23 has nearly:
- recouped what was lost,
- renewed what had paused, and
- re-energised what had slowed during the pandemic and since the conflict in Europe.
- The survey also highlighted few downside risks which might affect the growth:
- Low demand for Indian exports due to poor global growth may widen India’s trade deficit and make the rupee depreciate.
- Also, sustained monetary tightening (higher interest rates) may drag down economic activity in FY24.
Image Caption: Upside and Downside risks of GDP growth
- The RBI has projected headline inflation at 6.8% in FY23, outside its comfort zone of 2% to 6%.
- The Survey sounded optimistic about the inflation levels and trajectory as both wholesale and retail inflation are on the descending slope.
- However, any re-emergence of Covid-19 situation in China or a reversal of slump in commodity prices poses risks to the inflation trajectory going ahead.
- The Survey said employment levels have risen in the current financial year.
- It pointed to the Periodic Labour Force Survey (PLFS), which showed that urban 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 unemployment rate is accompanied by an improvement in the labour force participation rate.
- Capital Expenditure (capex) Target
- Capital expenditure has started to stimulate private investment, and the budget target of ₹7.5 lakh crore for the current fiscal year is expected to be met.
- Strong domestic demand and a pickup in capital investment will support the country’s growth trajectory in FY24.
- There is an expectation of a recovery in private capex, driven by improved balance sheets, resurging credit, and the crowding in from public capex.
- The survey said that the government’s thrust on capex, particularly in the infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs, has longer-term implications for growth.
- PM Gati Shakti has additionally assisted in accelerating infrastructure development.
- Capex-led growth will bring back animal spirits and help manage debt levels.
- Foreign Direct Investment (FDI) inflows
- Due to India's rapid economic growth and enhanced business environment, FDI into the nation is anticipated to increase in the upcoming months.
- According to data from the DPIIT, FDI equity inflows into India decreased by 14% to USD 26.9 billion over the period from April to September this fiscal.
- Current Account Deficit (CAD)
- The need for careful monitoring of the current account deficit, which could continue to grow due to elevated global commodity prices, was emphasised.
- The country's current account deficit increased to 4.4% of GDP in the quarter ending in September from 2.2% of GDP during the April-June period (RBI Data).
- Rupee likely to remain under depreciation pressure
- The pressure on the Indian rupee's depreciation may continue as a result of the export market's slowing and the subsequent expansion of the current account deficit.
Sectoral pointers from Economic Survey 2023
- Regulating crypto ecosystem
- The recent collapse of the cryptocurrency exchange FTX and the ensuing sell-off in the crypto markets have placed a spotlight on the vulnerabilities in the crypto ecosystem.
- Crypto assets are self-referential instruments and do not strictly pass the test of being a financial asset because it has no intrinsic cashflows attached to them.
- EV Market may cross 1-crore sales
- India’s Electric Vehicle (EV) market is expected to grow to 1-crore units annual sales by 2030 and create 5 crore direct and indirect jobs.
- In December 2022, India became the third-largest automobile market, surpassing Japan and Germany in terms of sales.
- 5G can unleash new eco avenues
- The rollout of 5G services can unleash new economic opportunities and help India leapfrog the traditional barriers to development, while boosting innovations by startups and business.
Suggestions given by the Economic Survey 2023
- The Survey has called for:
- entirely dismantling the LIC (licensing, inspection and compliance) regime to accelerate economic growth,
- harnessing women power (nari shakti),
- renewed focus on energy security and energy transition, education and skilling, administrative reforms.
- The survey sought determined efforts to make public sector asset monetisation scheme successful, besides addressing by states of the power sector issues.
- The Survey has also placed sufficient emphasis on fiscal consolidation, which it notes is critical for low interest rates in the long term.
Q1) Who prepares the Economic Survey of India?
The survey is prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance under the supervision of the Chief Economic Advisor of India (CEA).
Q2) What is the significance of Economic Survey of India?
The Survey document provides information about the state of the country's economy through various economic indicators. The Economic Survey also serves as a precursor to the Union Budget by outlining the general structure of the budget document.