NEW DELHI: Union Finance Minister Nirmala Sitharaman on Monday presented Economic Survey 2023-24 forecasting robust real GDP growth of 6.5% to 7%. The Reserve Bank of India (RBI) expects inflation to be 4.5% in FY25 and 4.1% in FY26.
The survey commended the Indian economy's resilience against global challenges. It noted over 7% growth for the third consecutive year. This growth was driven by stable consumption. It was also driven by improving investment demand. Gross value added (GVA) at 2011-12 prices increased by 7.2% in FY24. Net taxes at constant prices rose by 19.1% This was supported by strong tax growth and subsidy rationalisation.
India's current account deficit (CAD) improved to 0.7% of GDP in FY24 from 2.0% in FY23. By March 2024 India’s forex reserves could cover over 10 months of projected imports for FY25 and 98% of its external debt. The external debt-to-GDP ratio stood at sustainable 18.7%.
The survey highlighted improved fiscal balances despite significant public investment. The enhanced tax compliance expenditure restraint and digitisation contributed to this balance. It also anticipated stronger private investment. This was due to healthier corporate and bank balance sheets. The projection indicated continued strong growth in FY25. This is subject to geopolitical, financial market and climatic risks.
India’s banking and financial sectors showed stellar performance in FY24. There was double-digit growth in bank credit. Low levels of non-performing assets and improved bank asset quality were observed. Primary capital markets facilitated ₹10.9 lakh crore in capital formation. India's stock market capitalization surged. The market capitalization-to-GDP ratio ranked fifth globally.
Retail inflation was maintained at 5.4% It was the lowest since the pandemic. This was due to policy interventions and RBI's measures. Core inflation in both goods and services decreased significantly. However food inflation was exacerbated. It rose to 7.5% in FY24 from 6.6% in FY23. Extreme weather and agricultural challenges were contributing factors.
The survey expects short-term inflation to decrease assuming normal monsoon and no external shocks. The RBI and IMF project inflation to fall to around 4.5% 4.6% in FY25.
Foreign direct investment inflows slowed as Net FDI dropped from $42 billion in FY23. It fell to $26.5 billion in FY24. Nonetheless, gross FDI remained steady at just under $71 billion.
Overall, Economic Survey 2023-24 paints a positive outlook for India's economy, emphasizing macroeconomic stability. Emphasizing resilience amidst global uncertainties.
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