Economy on stronger wicket than pre-COVID times, to grow 6.5% in 2023-24

Need to stay vigilant on inflation and the current affairs deficit, says the Chief Economic Advisor, adding that commodity prices should retreat on the back of monetary tightening

Painting an exuberant picture of the Indian economy’s prospects thanks to “New Age” reforms undertaken since 2014, the Economic Survey tabled by Finance Minister Nirmala Sitharaman in Parliament on Tuesday asserted that not only are the pandemic-induced blues over, but the outlook for the years ahead is also rosier than in the pre-COVID years.

Though global uncertainties are rife and the world economy is slowing, the Survey exuded confidence that India’s GDP would grow 6.5% in 2023-24, after an estimated 7% this year, “supported by solid domestic demand and a pickup in capital investment”.

“The 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 averred.

The final growth outcome for 2023-24 could be in the range of 6% to 6.8%, depending on the trajectory of global economic and political developments. “Some of you may think the range is asymmetric in nature, but that is deliberate because there is still uncertainty. We have many known unknowns and unknown unknowns,” remarked Chief Economic Advisor (CEA) V. Anantha Nageswaran.

While the Survey expects inflation -- a bugbear for the economy throughout this year -- to be “well-behaved” in 2023-24, the CEA acknowledged there were upside risks to commodity prices from external factors such as China rapidly reopening its economic activity. The Central bank’s estimate of 6.8% retail inflation for 2022-23 is outside its target range, but “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,” the Survey said.

“We expect [that] if the global economy slows down as IMF and many people project, then commodity prices should retreat on the back of the monetary tightening… As of now, the United States economy looks set to avoid a full-fledged formal recession. And therefore, this January, already we have seen crude oil prices and industrial metal prices are higher than they were at the end of December,” the CEA noted.

Monetary and fiscal authorities will need to stay proactive and vigilant on inflation as well as the worsening current account deficit front, the Survey noted, flagging multiple risks for the latter, including slowing exports, a rising import bill due to strong domestic demand and commodity prices still being above pre-conflict levels.