Economic Survey 2023: Private consumption edges up; highest since FY15 across H1

Union Finance Minister Nirmala Sitharaman tabled the Economic Survey 2022-23 in Parliament on Tuesday. According to the Survey, India’s economic growth in FY23 has been principally led by private consumption and capital formation.

The Survey highlighted that private consumption as a percentage of gross domestic product (GDP) stood at 58.4 per cent in the second quarter of FY23, the highest among the second quarters of all the years since 2013-14. It is also the highest since FY15 across H1.

This was supported by a rebound in contact-intensive services such as trade, hotel and transport, which registered sequential growth of 16 per cent in real terms in Q2 of FY23 compared to the previous quarter, the study pointed.

Although domestic consumption rebounded in many economies, the rebound in India was impressive, the Survey said. It added that the rebound in consumption has also been supported by the release of “pent-up” demand, a phenomenon not unique to India but nonetheless exhibiting a local phenomenon influenced by a rise in the share of consumption in disposable income.

Private consumption is the spending of households and individuals on goods and services. The increase in private consumption signals that households have more disposable income, which in turn drives economic growth.

The study pointed that since the share of consumption in disposable income is high in India, a pandemic-induced suppression of consumption built up that much greater recoil force. Hence, the consumption rebound may have lasting power.

"Accelerating growth in personal loans in India testifies to an enduring release of “pent-up” demand for consumption. RBI’s most recent survey of consumer confidence released in December 2022 pointed to improving sentiment with respect to current and prospective employment and income conditions," it added.

Meanwhile, the Economic Survey also forecast that the economy is expected to grow between 6 per cent to 6.8 per cent in the next financial year starting April 1, down from 7 per cent projected for the current year. It said that the growth depends on the trajectory of economic and political developments globally.

Also Read: Economic Survey 2023: India sees GDP growth dipping to 6-6.8% in 2023-24