Here are the key highlights of Economic Survey 2023:
GDP Growth: Recovery from Covid is complete
* India to remain the fastest-growing major economy in the world. Recovering from pandemic-induced contraction, Russian-Ukraine conflict and inflation, Indian economy is staging a broad based recovery across sectors, positioning to ascend to the pre-pandemic growth path in FY23.
* India’s GDP growth is expected to remain robust in FY23 at 7 per cent (in real terms). This follows an 8.7 per cent growth in the previous financial year.
* GDP forecast for FY24 to be in the range of 6-6.8 %, depending on the trajectory of economic and political developments globally.
* Economic Survey 2022-23 projects a baseline GDP growth of 11 per cent in nominal terms and 6.5 per cent in real terms in FY 24.
* India’s recovery from pandemic was relatively quick, and growth in the upcoming year will be supported by solid domestic demand and a pick-up in capital investment. Aided by healthy financials, incipient signs of a new private sector capital formation cycle are visible and, more importantly, compensating for the private sector’s caution in capital expenditure, the government raised capital expenditure substantially.* India is third largest economy in PPP (purchasing power parity) terms, fifth largest in terms of exchange rate
* Private consumption as a per cent of GDP stood at 58.5 per cent in Q2 of FY23, the highest among the second quarters of all the years since FY15, supported by a rebound in contact-intensive services such as trade, hotel and transport.
* Growth driven by private consumption, higher capex, strengthening corporate balance sheet, credit growth to small businesses and return of migrant workers to cities
* Economy has nearly “recouped” what was lost, “renewed” what had paused, and “renerengised” what had slowed during the pandemic and since the conflict in Europe.
* The Capital Expenditure of Central Government and crowding in the private Capex led by strengthening of the balance sheets of the Corporates is one of the growth driver of the Indian economy in the current year.
Inflation: Borrowing cost to remain ‘higher’
* While India’s retail inflation rate peaked at 7.8 per cent in April 2022, above the RBI’s upper tolerance limit of 6 per cent, the overshoot of inflation above the upper end of the target range in India was however one of the lowest in the world.
* RBI projection of 6.8 pc inflation this fiscal outside the upper target limit, not high enough to deter private consumption, also not too low to weaken inducement to invest.
* Borrowing cost may remain ‘higher for longer’, entrenched inflation may prolong tightening cycle.
* India’s inflation management has been particularly noteworthy and can be contrasted with advanced economies that are still grappling with sticky inflation rates.
Credit Growth Remarkably High
Credit growth to the Micro, Small and Medium Enterprises (MSME) sector has been remarkably high, over 30.5 per cent, on average during Jan-Nov 2022.
* Capital expenditure of the central government, which increased by 63.4 per cent in the first eight months of FY 23, was another growth driver of the Indian economy in the current year.
Current Account Deficit may Widen
* The Economic Survey cautions that the challenge of the depreciating rupee, although better performing than most other currencies, persists with the likelihood of further increases in policy rates by the US Fed.
* CAD may continue to widen as global commodity prices remain elevated, economic growth momentum stays strong
* Rupee may come under pressure if Current Account Defict widens.
* Risks to the CAD stem from multiple sources. While commodity prices have retreated from record highs, they are still above pre-conflict levels. It has further widened the current account deficit (CAD), already enlarged by India’s growth momentum.
* For FY 23, India has sufficient forex reserves to finance the CAD and intervene in the forex market to manage volatility in the Indian rupee.
* Surge in growth of exports in FY22 and the first half of FY23 induced a shift in the gears of the production processes from mild acceleration to cruise mode.
* Electronics exports rise nearly threefold, from US $4.4 billion in FY19 to US $11.6 Billion in FY22.
Fiscal Position: Revenue Generation showing resilient performance
* The government’s finances have shown a resilient performance during the year FY23, facilitated by the recovery in economic activity, buoyancy in revenues from direct taxes and GST.
* The Gross Tax Revenue registered a YoY growth of 15.5 per cent from April to November 2022, driven by robust growth in the direct taxes and GST.
* Growth in direct taxes in the first eight months of the year was much higher than their corresponding longer-term averages.
* GST has stabilised as a vital revenue source for central and state governments, with the gross GST collections increasing at 24.8 per cent on YoY basis from April to December 2022.
* The Centre’s Capex has steadily increased from a long-term average of 1.7 per cent of GDP (FY09 to FY20) to 2.5 per cent of GDP in FY22 PA.
* With an emphasis on infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs, the increase in Capex has large-scale positive implications for medium-term growth.
* The Government’s Capex-led growth strategy will enable India to keep the growth-interest rate differential positive, leading to a sustainable debt to GDP in the medium run.
Monetary Policy: A Good Year
* RBI initiated its monetary tightening cycle in April 2022 and has since raised the repo rate by 225 bps, leading to moderation of surplus liquidity conditions.
* Cleaner balance sheets led to enhanced lending by financial institutions.
* The growth in credit offtake is expected to sustain, and combined with a pick-up in private capex, will usher in a virtuous investment cycle.
* Non-food credit offtake by scheduled Commercial Banks (SCBs) has been growing in double digits since April 2022.
* Credit disbursed by Non-Banking Financial Companies (NBFCs) has also been on the rise.
* Gross Non-Performing Assets (GNPA) ratio has fallen to a seven-year low of 5.
* The Capital-to-Risk Weighted Assets Ratio (CRAR) remains healthy at 16.0.
* The recovery rate for the SCBs through Insolvency and Bankruptcy (IBC) was highest in FY22 compared to other channels.
Social Infrastructure and Employment:
* Social Sector witnessed significant increase in government spending.
* Central and State Government’s budgeted expenditure on health sector touched 2.1% of GDP in FY23 (BE) and 2.2% in FY22 (RE) against 1.6% in FY21.
* Social sector expenditure increases to Rs. 21.3 lakh crore in FY23 (BE) from Rs. 9.1 lakh crore in FY16.
* The Aspirational Districts Programme has emerged as a template for good governance, especially in remote and difficult areas.
* JAM (Jan-Dhan, Aadhaar, and Mobile) trinity, combined with the power of DBT, has brought the marginalised sections of society into the formal financial system, revolutionising the path of transparent and accountable governance by empowering the people.
* Aadhaar played a vital role in developing the Co-WIN platform and in the transparent administration of over 2 billion vaccine doses.
Unemployment Rate Falling:
* Labour markets have recovered beyond pre-Covid levels, in both urban and rural areas, with unemployment rates falling from 5.8 per cent in 2018-19 to 4.2 per cent in 2020-21.
* The year FY22 saw improvement in Gross Enrolment Ratios (GER) in schools and improvement in gender parity. GER in the primary-enrolment in class I to V as a percentage of the population in age 6 to 10 years – for girls as well as boys have improved in FY22.
* Due to several steps taken by the government on health, out-of-pocket expenditure as a percentage of total health expenditure declined from 64.2% in FY14 to 48.2% in FY19.
* Infant Mortality Rate (IMR), Under Five mortality rate (U5MR) and neonatal Mortality Rate (NMR) have shown a steady decline.
* More than 220 crore COVID vaccine doses administered as on 06 January, 2023.
* Nearly 22 crore beneficiaries have been verified under the Ayushman Bharat Scheme as on 04 January, 2023. Over 1.54 lakh Health and Wellness Centres have been operationalized across the country under Ayushman Bharat.
Agriculture and allied sector performance have been buoyant:
* Private investment in agriculture increases to 9.3% in 2020-21.
* MSP for all mandated crops fixed at 1.5 times of all India weighted average cost of production since 2018.
Institutional Credit to the Agricultural Sector continued to grow to 18.6 lakh crore in 2021-22
* Foodgrains production in India saw sustained increase and stood at 315.7 million tonnes in 2021-22.
* Free foodgrains to about 81.4 crore beneficiaries under the National Food Security Act for one year from January 1, 2023.
* About 11.3 crore farmers were covered under the Scheme in its April-July 2022-23 payment cycle.
* Rs 13,681 crores sanctioned for Post-Harvest Support and Community Farms under the Agriculture Infrastructure Fund.
* Online, Competitive, Transparent Bidding System with 1.74 crore farmers and 2.39 lakh traders put in place under the National Agriculture Market (e-NAM) Scheme.
* Organic Farming being promoted through Farmer Producer Organisations (FPO) under the Paramparagat Krishi Vikas Yojana (PKVY).
* India stands at the forefront to promote millets through the International Year of Millets initiative.
Industry: Steady Recovery
* Overall Gross Value Added (GVA) by the Industrial Sector (for the first half of FY 22-23) rose 3.7 per cent, which is higher than the average growth of 2.8 per cent achieved in the first half of the last decade.
* Robust growth in Private Final Consumption Expenditure, export stimulus year, increase in investment demand and strengthened bank and corporate balance sheets have provided a demand stimulus to industrial growth.
* The supply response of the industry to the demand stimulus has been robust.
* PMI manufacturing has remained in the expansion zone for 18 months since July 2021, and Index of Industrial Production (IIP) grows at a healthy pace.
* Credit to Micro, Small and Medium Enterprises (MSMEs) has grown by an average of around 30% since January 2022 and credit to large industry has been showing double-digit growth since October 2022.
* India has become the second-largest mobile phone manufacturer globally, with the production of handsets going up from 6 crore units in FY15 to 29 crore units in FY21.
* Foreign Direct Investment (FDI) flows into the Pharma Industry has risen four times, from US $180 million in FY19 to US $699 million in FY22.
* The Production Linked Incentive (PLI) schemes introduced across 14 categories, with an estimated capex of ₹4 lakh crore over the next five years, to plug India into global supply chains. Investment of ₹47,500 crores has been seen under the PLI schemes in the FY22, which is 106% of the designated target for the year. Production/sales worth ₹3.85 lakh crore and employment generation of 3.0 lakh have been recorded due to PLI schemes.
* Over 39,000 compliances have been reduced and more than 3500 provisions decriminalized as of January 2023.
Services: Source of Strength
* The services sector is expected to grow at 9.1% in FY23, against 8.4% (YoY) in FY22.
* Robust expansion in PMI services, indicative of service sector activity, observed since July 2022.
* India was among the top ten services exporting countries in 2021, with its share in world commercial services exports increasing from 3 per cent in 2015 to 4 per cent in 2021.
* Credit to services sector has grown by over 16% since July 2022.
* US$ 7.1 billion FDI equity inflows in services sector in FY22.
* Contact-intensive services are set to reclaim pre-pandemic level growth rates in FY23.
* Sustained growth in the real estate sector is taking housing sales to pre-pandemic levels, with a 50% rise between 2021 and 2022.
* Hotel occupancy rate has improved from 30-32% in April 2021 to 68-70% in November 2022.
* Tourism sector is showing signs of revival, with foreign tourist arrivals in India in FY23 growing month-on-month with resumption of scheduled international flights and easing of Covid-19 regulations.
* India’s e-commerce market is projected to grow at 18 per cent annually through 2025.
* Merchandise exports were $332.8 billion for April-December 2022.
* India diversified its markets and increased its exports to Brazil, South Africa and Saudi Arabia.
* To increase its market size and ensure better penetration, in 2022, CEPA with UAE and ECTA with Australia come into force.
* India is the largest recipient of remittances in the world receiving US$ 100 bn in 2022. Remittances are the second largest major source of external financing after service export
* As of December 2022, Forex Reserves stood at $ 563 billion covering 9.3 months of imports.
* As of end-November 2022, India is the sixth largest foreign exchange reserves holder in the world.
* The current stock of external debt is well shielded by the comfortable level of foreign exchange reserves.
* India has relatively low levels of total debt as a percentage of Gross National Income and short-term debt as a percentage of total debt.
National Infrastructure Pipeline
* 89,151 projects costing ₹141.4 lakh crore under different stages of implementation; 1009 projects worth ₹5.5 lakh crore completed
National Monetisation Pipeline
* ₹ 0.9 lakh crore monetisation target achieved against expected ₹0.8 lakh crore in FY22.
* FY23 target is envisaged to be ₹1.6 lakh crore (27 per cent of overall NMP Target)
* Electricity Sector and Renewables
* As on September 30, 2022, the government has sanctioned the entire target capacity of 40 GW for the development of 59 Solar Parks in 16 states.
* 17.2 lakh GWh electricity generated during the year FY22 compared to 15.9 lakh GWh during FY21.
* The total installed power capacity (industries having demand of 1 Mega Watt (MW) and above) increased from 460.7 GW on 31 March 2021 to 482.2 GW on 31 March 2022.
Making Indian Logistics Globally Competitive
* Rapid increase in National Highways (NHs) /Roads Construction with 10457 km NHs/roads constructed in FY22 compared to 6061 km in FY16.
* Budget expenditure increased from ₹1.4 lakh crore in FY20 to ₹2.4 lakh crore in FY23 giving renewed push to Capital expenditure.
* More than one crore air passengers availed the benefit of the UDAN scheme since its inception in 2016.
* Near doubling of capacity of major ports in 8 years.
India’s Digital Growth
* UPI-based transactions grew in value (121 per cent) and volume (115 per cent) terms, between 2019-22, paving the way for its international adoption.
* Total telephone subscriber base in India stands at 117.8 crore (as of Sept,22), with 44.3 per cent of subscribers in rural India.
* More than 98 per cent of the total telephone subscribers are connected wirelessly. The overall tele-density in India stood at 84.8 per cent in March 22.
* 200 per cent increase in rural internet subscriptions between 2015 and 2021.