Economic Survey primer: Here are short notes on key economic policy issues

A few nuggets from the survey - recouping what was lost, and re-energising what had slowed down

‘Recovery complete’

• Indian economy is staging a broad-based recovery across sectors, positioning to ascend to the pre-pandemic growth path in FY23.  The capital expenditure of the government and crowding in the private capex led by strengthening balance sheets of companies is a growth drivers for the Indian economy in the current year

• Retail inflation was back within RBI’s target range in November 2022. Direct tax collections for April-November 2022 remained buoyant

• The credit growth to the MSME sector was over 30.6 per cent on average during Jan-Nov 2022

Pandemic behind us

• The Indian economy in FY23 has nearly “recouped” what was lost, “renewed” what had paused, and “re-energised” what had slowed during the pandemic and since the conflict in Europe

• Growth in the upcoming year will be supported by solid domestic demand and a pick-up in capital investment

Survey’s largest chapter devoted to social sector

• Social sector expenditure — Centre and states combined — increased to Rs 21.3 trillion in FY23 (BE) from Rs 9.1 trillion in FY16. Their budgeted expenditure on health sector touched 2.1 per cent of GDP in FY23 (BE) and 2.2 per cent in FY22 (RE) against 1.6 per cent in FY21

• More than 2.2 billion Covid vaccine doses administered. The Survey highlights the findings of the 2022 UNDP report on multi-dimensional poverty index — 415 million people exited poverty in India between 2005-06 and 2019-20

• Enhanced employment generation seen in the declining urban unemployment rate and in the faster net registration in employee provident fund

Climate action

• India declared Net Zero Pledge to achieve Net Zero emissions goal by 2070. While the target was to achieve 40 per cent of the installed electric capacity from non-fossil fuel sources by 2030 in the initial NDC submitted in 2015, the target has already been achieved

• A mass movement LIFE (Life style for Environment) launched. National Green Hydrogen Mission to enable India to be energy-independent by 2047

• Power ministry has estimated  that the average emission rate will decline by around 29 per cent by 2029-30 compared to 2014-15.

Services are the source of strength

• India’s e-commerce market is projected to grow at 18 per cent annually through 2025. Prospects look bright for tourism, hotel, real estate, IT-BPM 

• Downside risk, however, lies in the external exogenous factors, and bleak economic outlook in advanced economies impacting growth prospects of the services sector

Inflation challenges

• The inflation challenge in FY24 must be a lot less stiff than it has been this year. It is not wishful thinking that 2023 will show less macroeconomic volatility than its preceding financial year. Inflation risks coming from global commodity prices are likely to be lower in FY24 than in FY23

• However, the re-emergence of Covid-19 in China can trigger supply chain disruptions. The geopolitics associated with oil can particularly affect our imported inflation 

External sector concerns

• India’s external sector has been facing considerable global headwinds on geopolitical developments. There is high uncertainty associated with the forecast due to shifting monetary policy in advanced economies and the unpredictable nature of the Ukraine conflict

• Going forward, the expected easing of crude oil prices, the resilience of net services exports, and buoyant inward remittances would result in lower CAD during the remainder of FY23