Commodity prices will raise total import bill and add to unfavourable developments in current account balance, it says
New Delhi, NFAPost: India is projected to grow at a baseline rate of 6.5 per cent and a range of 6-6.8 per cent in the coming 2023-24 (FY24) with the global macroeconomic slowdown being the key risk factor to the forecast, the 2022-23 Economic Survey said on Tuesday.
“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,” said the survey, authored by Chief Economic Advisor V Anantha Nageswaran and his team. This is Nageswaran’s first survey.
The baseline nominal GDP growth is forecast at 11 percent.
The survey said that growth is expected to be brisk in FY24 due to 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,” it said.
The survey said India’s recovery from the pandemic was relatively quick, and growth in the upcoming year will be supported by solid domestic demand and a pickup 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.
The International Monetary Fund, in its January World Economic Outlook, expected global growth to slow from 3.2 per cent in 2022 to 2.9 per cent in 2023.
A slower growth in economic output coupled with increased uncertainty will dampen trade growth. This is seen in the lower forecast for growth in global trade by the World Trade Organization, from 3.5 per cent in 2022 to 1.0 per cent in 2023, the survey said.
“On the external front, risks to the current account balance stem from multiple sources. While commodity prices have retreated from record highs, they are still above pre-conflict levels. Strong domestic demand amidst high commodity prices will raise India’s total import bill and contribute to unfavourable developments in the current account balance,” it said.
The survey said that entrenched inflation may prolong the tightening cycle, and therefore, borrowing costs may stay ‘higher for longer’. In such a scenario, the global economy may be characterised by low growth in FY24.
“However, the scenario of subdued global growth presents two silver linings – oil prices will stay low, and India’s CAD will be better than currently projected. The overall external situation will remain manageable,” the survey said.
