Representative image of India's GDP.
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New Delhi: India’s gross domestic product (GDP) growth is expected to slow down to 6.5–7 per cent in the current financial year from 8.2 per cent recorded in the year ended March 2024, as per the Economic Survey 2023-24 tabled in Parliament on Monday.
“The Survey conservatively projects a real GDP growth of 6.5–7 per cent, with risks evenly balanced, cognizant of the fact that the market expectations are on the higher side,” the annual economic document tabled in the Parliament by Finance Minister Nirmala Sitharaman a day ahead of the presentation of the Union Budget noted.
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The Economic Survey’s growth projection is either lower or in line with the estimates of major organisations. The Reserve Bank of India (RBI) last month raised the GDP growth forecast for the current fiscal to 7.2 per cent from its earlier estimate of 7 per cent. The International Monetary Fund (IMF) and the Asian Development Bank (ADB) have pegged India’s GDP growth for 2024-25 at 7 per cent.
According to the Economic Survey, private capital formation after good growth in the last three years may turn slightly more cautious because of fears of cheaper imports from countries that have excess capacity.
“While merchandise exports are likely to increase with improving growth prospects in AEs, services exports are also likely to witness a further uptick,” it said.
"A normal rainfall forecast by the India Meteorological Department and the satisfactory spread of the southwest monsoon thus far are likely to improve agriculture sector performance and support the revival of rural demand. However, the monsoon season still has some ways to go," the 522-page survey report authored by Chief Economic Advisor V Anantha Nageswaran stated.
“In April, we commenced a new financial year. In May, we learnt that the Indian economy is estimated to have grown 8.2 per cent in real terms in FY24. In June, a new government took office,” Nageswaran said in the preface of the report.
“The National Democratic Alliance government led by Prime Minister Narendra Modi has returned to power with a historic mandate for a third term. His unprecedented third popular mandate signals political and policy continuity,” he added.
The survey further highlighted that the Indian economy has recovered and expanded in an orderly fashion post pandemic. The real GDP in FY24 was 20 per cent higher than its level in FY20, a feat that only a very few major economies achieved. “Prospects for continued strong growth beyond FY25 look good, subject to geopolitical, financial market and climatic risks,” it said.
On inflation, the survey noted that after averaging 6.7 per cent in FY23, retail inflation declined to 5.4 per cent in FY24. This has been due to the combination of measures undertaken by the government and the RBI. The Union government undertook prompt measures such as open market sales, retailing in specified outlets, timely imports, reduced the prices of Liquefied Petroleum Gas (LPG) cylinders and implemented a cut in petrol and diesel prices, it said.
The RBI raised policy rates by a cumulative 250 bps between May 2022 and February 2023. It also managed liquidity levels efficiently and maintained consistent and coherent communication with market participants, the survey added.
The decrease in retail inflation in FY24 was driven by a fall in core inflation - both goods and services. Core services inflation eased to a nine-year low in FY24; at the same time, core goods inflation also declined to a four-year low.
Going forward, the RBI projects inflation to fall to 4.5 per cent in FY25 and 4.1 per cent in FY26, assuming normal monsoon and no external or policy shocks. Similarly, the IMF forecasts inflation of 4.6 per cent in 2024 and 4.2 per cent in 2025 for India.
Union Budget 2024 | Making a record for any Finance Minister, Nirmala Sitharaman will be presenting her 7th Union Budget on July 23, 2024 under the Modi 3.0 government. While inflation has burnt a hole in the pockets of 'aam janata', will this Budget spell relief for Indians? Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.