Economy to grow at 8.5% in FY23: Survey

However, the survey tabled in the Parliament on Monday flagged challenges on account of tightening global liquidity, ‘imported inflation’ arising from high global commodity prices and uncertainties related to the new variants of covid-19. Still, it said that the Centre’s “comfortable” fiscal position could provide additional support to the economy if needed.

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Calling it a conservative estimate compared to projections by other agencies, newly appointed chief economic adviser V. Anantha Nageswaran attributed the economic revival to credit growth pick-up and expected capital expenditure cycle to pick up the pace, crowding in the private sector, leading to job creation.

“The growth naturally recovers from the fact that we had a 7% contraction in real terms in 2020-21 (revised to a 6.6% contraction in the first revised estimate released on Monday),” Nageswaran said at his first press briefing after taking charge on Friday. He said credit growth was picking up from a very low base, the corporate sector has deleveraged, profitability was good, and the capex cycle was going to build on the back of what the government has done. The estimate is lower than the projection by the International Monetary Fund, which expects the economy to expand by 9% in FY23.

The survey gave ample indications to the government about policy issues requiring its attention, including greater capital spending requirement, a framework for green financing and diversifying crops to prevent depletion of groundwater resources. The survey also made a case for greater capital investments in agriculture. Recognizing the correlation between capital investments in agriculture and its growth rate, the survey called for a focused and targeted approach to ensure higher public and private investment in the sector. Greater access to concessional institutional credit to farmers and greater participation of the private corporate sector will help, it said.

The Economic Survey adopted a single volume format with an easy-to-refer statistical appendix, in a change from the two-volume plus appendix format. Sanjeev Sanyal, principal economic adviser in the finance ministry, said in the preface that the two-volume format did allow space for bringing in new ideas and themes but, at almost 900 pages, it was also becoming unwieldy.

The latest advance estimates suggest full recovery of all components on the demand side in 2021-22 except for private consumption. Compared to pre-pandemic levels, recovery is most significant in exports, followed by government consumption and gross fixed capital formation. However, an equally strong recovery was seen in imports. According to the Economic Survey, growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending.

“The year ahead is also well-poised for a pick-up in private sector investment, with the financial system in a good position to provide support to the revival of the economy,” it said.

The growth projection for 2022-23 is based on several assumptions like, “no further debilitating pandemic related economic disruption, normal monsoon, orderly withdrawal of global liquidity by major central banks, oil prices in the range of $70-$75 per barrel, and steady easing of global supply chain disruptions over the course of the year.”

However, the survey flagged downside risks. “The global economy continues to be plagued by uncertainty, with resurgent waves of mutant variants, supply chain disruptions, and a return of inflation in both advanced and emerging economies. Moreover, the likely withdrawal of liquidity by major central banks over the next year may also make global capital flows more volatile,” said the survey prepared by a team led by Sanyal, who described the economic recovery as a ‘tilted W’ in the press briefing.