ECONOMIC SURVEY - ECONOMY
News: Economy
on stronger wicket than pre-COVID times, to grow 6.5% in 2023-24
What's in the news?
● 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.
● She
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.
Economic Survey:
● The
Survey provides a detailed report of the
national economy for the year along with forecasts.
● It
touches upon everything from agriculture to unemployment to infrastructure.
● It is prepared by the
Economic Division of the Department of Economic Affairs (DEA) under the
guidance of the Chief Economic Advisor.
● Once
prepared, the Survey is approved by the
Finance Minister.
● The
first Economic Survey was presented for 1950-51 and until 1964, it was
presented along with the Budget.
● Similarly,
for the longest time, the survey was presented in just one volume, with
specific chapters dedicated to different key sectors of the economy – such as
services, agriculture, and manufacturing – as well as key policy areas – such
as fiscal developments, state of employment and inflation etc.
What is the Economic Survey’s significance?
● Even
though it comes just a day before the Budget, the assessment and
recommendations carried in the survey are not binding on the Budget.
● Still,
the survey remains the most
authoritative and comprehensive analysis of the economy that is conducted
from within the Union government.
● As
such, its observations and details provide an official framework for analyzing
the Indian economy.
● The comments or policy
solutions contained in the Survey are not binding on the government.
Key takeaways:
GDP growth:
● The
Survey said India’s growth estimate for FY23 is higher than for almost all
major economies.
● Despite
strong global headwinds and tighter domestic monetary policy, if India is still expected to grow between 6.5
and 7.0 percent is a reflection of India’s underlying economic resilience;
of its ability to recoup, renew and re-energise the growth drivers of the
economy.
Inflation:
● The
RBI has projected headline inflation at
6.8% in FY23, outside its comfort zone of 2% to 6%.
● High
inflation is seen as one big factor holding back demand among consumers.
● However,
the Survey sounded optimistic about the inflation levels and trajectory, saying “it is not high enough to deter
private consumption and also not so low as to weaken the inducement to invest.”
Unemployment:
● The
Survey said “employment levels have risen in the current financial year”.
● The
Survey points out that the rise in
employment levels is due to
○ the
initial surge in exports.
○ a
strong release of the “pent-up” demand and
○ a
swift rollout of the capex.
● 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 underlines that fall in unemployment rate is accompanied by an improvement
in the labour force participation rate.
Outlook for 2023-24:
● The
Survey projected a baseline GDP growth of 6.5% in real terms in FY24.
● However,
it detailed some downside risks. For instance, low demand for Indian exports
due to poor global growth, may widen India’s trade deficit and make the rupee
depreciate.
● Similarly,
sustained monetary tightening (higher
interest rates) may drag down economic activity in FY24.
What does it mean for India’s economy?
● The
central thrust of this year’s Survey is that India’s economy has recovered from the Covid disruption and, at long
last, is poised to see sustained robust growth in the rest of the decade.
● CEA
V Anantha Nageswaran said the phase between 2014 and 2022 has witnessed “wide-ranging structural and governance
reforms that strengthened the economy’s fundamentals by enhancing its overall
efficiency”.
○ He
clarified that these reforms had not yielded the desired results because banks
were getting rid of their non-performing assets (NPAs) and business firms were
deleveraging.
○ Shocks
such as the Covid pandemic and the Ukraine war made matters worse.