On Tuesday, 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 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).
As per the economic survey 2022, 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 FY24. GDP forecast for FY24 to be in the range of 6-6.8 %.
Private consumption in H1 is highest since FY15 and this has led to a boost to production activity resulting in enhanced capacity utilisation across sectors.
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.
The credit growth to the MSME sector was over 30.6 per cent on average during Jan-Nov 2022.
Retail inflation is back within RBI’s target range in November 2022.
Indian Rupee performed well compared to other Emerging Market Economies in Apr-Dec2022.
Direct Tax collections for the period April-November 2022 remain buoyant.
Enhanced Employment generation seen in the declining urban unemployment rate and in the faster net registration in Employee Provident Fund.
Economic growth to be boosted from the expansion of public digital platforms and measures to boost manufacturing output.
India’s Medium Term Growth Outlook: with Optimism and Hope
Indian economy underwent wide-ranging structural and governance reforms that strengthened the economy’s fundamentals by enhancing its overall efficiency during 2014-2022.
With an underlying emphasis on improving the ease of living and doing business, the reforms after 2014 were based on the broad principles of creating public goods, adopting trust-based governance, co-partnering with the private sector for development, and improving agricultural productivity.
The period of 2014-2022 also witnessed balance sheet stress caused by the credit boom in the previous years and one-off global shocks, that adversely impacted the key macroeconomic variables such as credit growth, capital formation, and hence economic growth during this period.
This situation is analogous to the period 1998-2002 when transformative reforms undertaken by the government had lagged growth returns due to temporary shocks in the economy. Once these shocks faded, the structural reforms paid growth dividends from 2003.
Similarly, the Indian economy is well placed to grow faster in the coming decade once the global shocks of the pandemic and the spike in commodity prices in 2022 fade away.
With improved and healthier balance sheets of the banking, non-banking and corporate sectors, a fresh credit cycle has already begun, evident from the double-digit growth in bank credit over the past months.
Indian economy has also started benefiting from the efficiency gains resulting from greater formalisation, higher financial inclusion, and economic opportunities created by digital technology-based economic reforms.
Thus Chapter 2 of the Survey shows that India’s growth outlook seems better than in the pre-pandemic years, and the Indian economy is prepared to grow at its potential in the medium term.
GDP growth:
The Survey said India’s growth estimate for FY23 is higher than for almost all major economies.
Indian Express quotes; “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,”.
Unemployment:
The Survey said “employment levels have risen in the current financial year”, and that “job creation appears to have moved into a higher orbit with 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 also underlined that the fall in unemployment rate is accompanied by an improvement in the labour force participation rate.
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.
The first thing to note is that even before Covid, India’s potential growth rate — that rate at which it can grow without inflation becoming a problem — had fallen to just 6%. In the 2003-2008 period it was 8%. Between 2009 and 2015, it was 7%. In the next few years, it is unlikely to rise much above 6%. Secondly, during the 2003-2008 phase, the global economy was booming — exactly opposite of the situation now.
Thirdly, in India, unemployment rates underestimate the alarming stress in the labour market, because labour force participation rate (or the proportion of people demanding jobs) is itself quite low. Moreover, over the past two decades, India’s growth has become increasingly capital-intensive (using relatively less labour). This trend is likely to worsen as automation eats into routine jobs.
India is the world’s most populous country with a growing youth bulge. It has the world’s largest pool of poor people and the largest pool of malnourished children. Given the low levels of per capita income, it requires much faster growth than many developed countries. A growth rate of 4% in India can feel like a recession and even though a 6% growth should be achievable, it may not create enough jobs to satisfy a growing population.
Check out more detailed information on the latest current affairs from the table below:
Government’s Vision for Infrastructure Development
The following are the details of Budget 2023 allocated to Infrastructure Development:
Public Private Partnerships
In-Principal Approval granted to 56 projects with Total Project Cost of ₹57,870.1 crore under the VGF Scheme, from 2014-15 to 2022-23.
IIPDF Scheme with ₹150 crore outlay from FY 23-25 was notified by the government on 03 November, 2022.
National Infrastructure Pipeline
89,151 projects costing ₹141.4 lakh crore under different stages of implementation
1009 projects worth ₹5.5 lakh crore completed
NIP and Project Monitoring Group (PMG) portal linkage to fast-track approvals/ clearances for projects
National Monetisation Pipeline
₹ 9.0 lakh crore is the estimated cumulative investment potential.
₹ 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)
GatiShakti
PM GatiShakti National Master Plan creates comprehensive database for integrated planning and synchronised implementation across Ministries/ Departments.
Aims to improve multimodal connectivity and logistics efficiency while addressing the critical gaps for the seamless movement of people and goods.
Electricity Sector and Renewables
As on 30 September 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.
External Sector
Merchandise exports were US$ 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.
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