3 min readNew DelhiJan 31, 2023 10:43 PM IST
First published on: Jan 31, 2023 at 02:49 PM IST
The Indian economy is seen growing 6.0-6.8 per cent with a baseline real GDP growth of 6.5 per cent in the next financial year 2023-24 on the back of a rebound in private consumption, higher capital expenditure, near-universal vaccination coverage enabling spending on contact-based services, and strengthening of the balance sheets of the corporates, says the Economic Survey for 2022-23 tabled in Parliament on Tuesday (January 31).
Challenges and risks
The Survey has listed risks and challenges from widening current account deficit (CAD) amid elevated commodity prices, likelihood of further rate increases in policy rates by the US Federal Reserve, the challenge of the depreciating rupee, and further possible loss of export stimulus amid slowing world growth and shrinking global market size along with ongoing monetary tightening exercise globally with “entrenched inflation” expected to prolong the tightening cycle.
“The upside to India’s growth outlook arises from (i) limited health and economic fallout for the rest of the world from the current surge in Covid-19 infections in China and, therefore, continued normalisation of supply chains; (ii) inflationary impulses from the reopening of China’s economy turning out to be neither significant nor persistent; (iii) recessionary tendencies in major AEs triggering a cessation of monetary tightening and a return of capital flows to India amidst a stable domestic inflation rate below 6 per cent; and (iv) this leading to an improvement in animal spirits and providing further impetus to private sector investment,” it said.
CAD a major concern
CAD will remain a risk on the external front, the Survey said. “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. These may be exacerbated by plateauing export growth on account of slackening global demand. Should the current account deficit widen further, the currency may come under depreciation pressure,” it said.
In the current year, India has faced the challenge of reining in inflation that the European strife accentuated, it said, adding that measures taken by the government and RBI, along with the easing of global commodity prices, have finally managed to bring retail inflation below the RBI upper tolerance target in November 2022.
“While the pace of rate hikes has slowed, major central banks have reaffirmed their hawkish stance on inflation. Entrenched inflation may prolong the tightening cycle, and therefore, borrowing costs may stay ‘higher for longer’. In such a scenario, 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,” it said.
The Survey has listed risks and challenges from widening current account deficit (CAD) amid elevated commodity prices, likelihood of further rate increases in policy rates by the US Federal Reserve among others. (Representational image) 
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