Decoding the Economic Survey: Budget 2024 Expectations

The Economic Survey 2022-23 signaled India's full economic recovery post-pandemic, projecting a growth range of 6% to 6.8% for the upcomingBudget 2024 Expectations 2023-24.

Discover the significance of the Economic Survey—an annual report by the Ministry of Finance, traditionally unveiled in Parliament a day before the Union Budget. Crafted by the Economics Division of the Department of Economic Affairs (DEA) under the guidance of the Chief Economic Advisor, the survey evaluates the previous year's economic developments and outlines the outlook for the current fiscal year.

Delving into the current state of the Indian economy, the survey provides comprehensive data on critical indicators like gross domestic product (GDP), inflation, employment, and trade.

The following expectations are raised in view of the economic survey 2023.

GDP Growth Expectations:

- Anticipate a baseline GDP growth of around 6.5% in real terms for the fiscal year 2023-24.

- Prepare for a GDP growth range of 6.0% to 6.8%, contingent on the trajectory of global economic and political developments.

Current Economic Scenario:

- Acknowledge the 7% growth in the economy for the year ending March 2023, following an 8.7% growth in the previous financial year.

Credit Growth to MSME Sector:

- Recognize the remarkably high credit growth of over 30.5% to the Micro, Small, and Medium Enterprises (MSME) sector during January-November 2022.

Capital Expenditure (CAPEX):

- Consider the 63.4% increase in the Central Government's capital expenditure in the first eight months of FY23 as a growth driver.

Inflation Projection:

- Account for the Reserve Bank of India's (RBI) projection of headline inflation at 6.8% in FY23, which exceeds its target range.

Housing Market Trends:

- Expect positive trends in the housing market due to the return of migrant workers to construction activities, leading to a significant decline in inventory overhang from 42 months to 33 months in Q3 of FY23.

Exports and Production Processes:

- Factor in the surge in export growth in FY22 and H1 of FY23, which has induced a shift in production processes from mild acceleration to cruise mode.

Private Consumption:

- Take note of private consumption as a percentage of GDP standing at 58.4% in Q2 of FY23, the highest among the second quarters since 2013-14. This is supported by a rebound in contact-intensive services like trade, hotel, and transport.

9. Global Trade Forecast:

- Be cautious about lower growth forecasts for global trade by the World Trade Organization, expecting a decline from 3.5% in 2022 to 1.0% in 2023. This may impact India's trade and economic prospects.

These points can be considered while formulating budget expectations and strategies for the upcoming fiscal year.

The optimistic growth forecasts stem from a number of positives like the rebound of private consumption given a boost to production activity, higher Capital Expenditure (Capex), near-universal vaccination coverage enabling people to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, as well as the return of migrant workers to cities to work in construction sites leading to a significant decline in housing market inventory, the strengthening of the balance sheets of the Corporates, a well-capitalized public sector banks ready to increase the credit supply and the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector to name the major ones.

The Economic survey says, growth is expected to be brisk in FY24 as a vigorous credit disbursal, and capital investment cycle is expected to unfold in India with the strengthening of the balance sheets of the corporate and banking sectors. Further support to economic growth will come from the expansion of public digital platforms and path-breaking measures such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes to boost manufacturing output.

According to Survey, India’s economic growth in FY23 has been principally led by private consumption and capital formation and they have helped generate employment as seen in the declining urban unemployment rate and in the faster net registration in Employee Provident Fund. Moreover, World’s second-largest vaccination drive involving more than 2 billion doses also served to lift consumer sentiments that may prolong the rebound in consumption. Still, private capex soon needs to take up the leadership role to put job creation on a fast track.

The Economic Survey-2023 says, in real terms, the economy is expected to grow at 7 per cent for the year ending March 2023. This follows an 8.7 per cent growth in the previous financial year.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates