Union Finance Minister Nirmala Sitharaman on Monday tabled the Economic Survey 2023-2024, a day before the Union Budget 2024-25. The survey noted that India’s economy carried forward the momentum it built in FY23 into FY24 despite a gamut of external challenges. "India's real GDP grew by 8.2 per cent in FY24, exceeding 8 per cent mark in three out of four quarters of FY24. The focus on maintaining macroeconomic stability ensured that external challenges had minimal impact on India’s economy," it said.
Even in the mini economic survey before the Interim Budget, the finance ministry released a report projecting a GDP growth rate of approximately 7% for FY25.
In June, RBI revised the growth forecast for FY25 to 7.2 from 7 percent. The country has grown more than 7 percent over the last three years. Earlier this month, the International Monetary Fund revised India's growth forecast to 7% for 2024/25 from 6.8%, aligning with recent updates from rating agencies and private economists. S&P has also pegged India's economic growth to nearly 7% annually over the next three years.
The survey noted that on the supply side, the gross value added (GVA) at 2011-12 prices grew by 7.2 per cent in FY24, with growth remaining broad-based. Net taxes at constant (2011-12) prices grew by 19.1 per cent in FY24, aided by reasonably strong tax growth, both at the centre and state levels and rationalisation of subsidy expenditure. This led to the difference between GDP and GVA growth in FY24.
Consolidation of Union Government Finances
The report noted against the global trend of widening fiscal deficit and increasing debt burden, India has remained on the course of fiscal consolidation.
The favourable fiscal performance in 2023, emerged as the cornerstone of India’s macroeconomic stability. The fiscal deficit of the Union Government has been brought down from 6.4 per cent of GDP in FY23 to 5.6 per cent of GDP in FY24, according to provisional actuals (PA) data released by the Office of Controller General of Accounts (CGA)," it noted.
"Strong growth in direct and indirect taxes on account of resilient economic activity and increased compliance meant that the tax revenues generated exceeded the conservative budgetary estimates. Additionally, higher-than-budgeted non-tax revenue in the form of dividends from the RBI has buffeted revenue receipts. In combination with restrained revenue expenditure, these buoyant revenues ensured lower deficits," it further said.
A decomposition of the fiscal deficit over the past few years reveals that with a narrowing revenue deficit, a larger share of the fiscal deficit is being accounted for by capital outlay. This suggests that the productivity of borrowed resources has improved.
"Last year, global exports of goods and services growth fell to 0.5% from 5.2% YoY in 2022. Amidst that, Indian total exports grew 2.63%, thanks to buoyancy in services exports. The economic survey points to a stronger rebound in GFCF that propped up growth as India emerged from the pandemic. While the government has shouldered a larger responsibility to invest in infrastructure, private investment in IP and machinery too has been strong growing cumulatively at 35% in four years. But investment in dwellings and structures has been even stronger pointing to a higher inclination among households to save in physical assets," said Dr. Rumki Majumdar, Economist, Deloitte India.