A quick guide to the Economic Survey 2022-23

The Economic Survey 2022-23 was tabled in Parliament by Finance Minister Nirmala Sitharaman on Tuesday. The document, prepared by a team of economists led by chief economic adviser V Anantha Nageswaran, analyses developments in the economy in the past year and makes projections for the following year. Here are some of the key takeaways.

Growth

- The Indian economy is expected to expand 7 percent in real terms in 2022-23, following the 8.7 percent growth in 2021-22. The survey notes that the economy had staged a full and broad-based recovery in 2021-22 and was positioned to ascend to the pre-pandemic growth path.
- The baseline GDP growth for 2023-24 has been projected at 6.5 percent in real terms. The survey has projected growth will be between 6 percent and 6.8 percent, depending on the trajectory of economic and political developments globally.
- India’s growth in 2023-24 was primarily led by private consumption and capital formation.
- Private consumption recovered post-pandemic. As a percentage of GDP, it was at 58.4 percent in the second quarter of 2022-23, which was also the highest for any second quarter since 2013-14. The rise of private consumption was supported by a rebound in contact-intensive services such as trade, hotels and transport.
- Private consumption may remain strong as inflation was not high enough to deter it nor low enough to weaken the inducement to invest.
- Private capital expenditure (capex) soon needs to take up the leadership role to put job creation on a fast track
- Government capex and crowding in of private capex led by strengthening of the balance sheets of corporates was another growth driver for the Indian economy in 2022-23.

Inflation

- India’s retail inflation rate peaked at 7.8 percent in April 2022, above the Reserve Bank of India’s (RBI) upper tolerance limit of 6 percent. The overshoot of inflation above the upper end of the target range in India was, however, one of the lowest in the world.
- The survey notes that India’s inflation management was particularly noteworthy and can be contrasted with that in advanced economies which are still grappling with sticky inflation rates.
- Also, the RBI’s anchoring of inflationary expectations through forward guidance and responsive monetary policy helped guide the trajectory of inflation in the country.
- The one-year-ahead inflationary expectations by both businesses and households have moderated in the current financial year.

Fiscal developments

- The government’s finances showed a resilient performance during the year, aided by the recovery in economic activity, buoyancy in revenues from direct taxes and goods and services tax (GST).
- The gross tax revenue registered a year-on-year growth of 15.5 percent from April to November 2022, driven by robust growth in the direct taxes and GST.
- GST stabilised as a vital revenue source for central and state governments, with gross GST collections increasing 24.8 per cent on a year-on-year basis from April to December 2022.
- The government's emphasis on capex continued despite higher revenue expenditure requirements during the year. The Centre's capex rose from a long-term average of 1.7 percent of GDP (FY09 to FY20) to 2.5 percent of GDP in 2021-22.
- The government’s capex-led growth strategy will enable India to keep the growth-interest rate differential positive, leading to a sustainable debt to GDP ratio in the medium run.

Monetary management

- Monetary tightening by the RBI since April 2022 has led to a moderation of surplus liquidity conditions.
- The growth in credit off take is expected to sustain, and combined with a pick-up in private capex, will usher in a virtuous investment cycle.
- Non-food credit off take by scheduled commercial banks has been growing in double digits since April 2022. Credit disbursed by non-banking financial companies has also been on the rise.
- The gross non-performing assets ratio of scheduled commercial banks fell to a seven-year low of 5.0 percent.

Social infrastructure and employment

- Government spending on the social sector witnessed a significant increase. It climbed to Rs 21.3 lakh crore in 2022-23 from Rs 9.1 lakh crore in 2015-16.
- The central and state governments’ budgeted expenditure on the health sector touched 2.1 percent of GDP in 2022-23 in the budget estimate and 2.2 percent in 2021-22 in the revised estimate.
- The JAM (Jan-Dhan, Aadhaar and mobile) trinity, combined with direct benefit transfers, has brought the marginalised sections of society into the formal financial system, revolutionising the path of transparent and accountable governance by empowering the people.
- Aadhaar played a vital role in developing the CoWIN platform and in the transparent administration of over 2 billion vaccine doses.
- Labour markets recovered beyond pre-Covid levels, in both urban and rural areas, with unemployment rates falling from 5.8 per cent in 2018-19 to 4.2 per cent in 2020-21.
- Due to several steps taken by the government on health, out-of-pocket expenditure as a percentage of total health expenditure declined from 64.2 percent in 2013-14 to 48.2 percent in 2018-19.

Agriculture and food management

- The performance of the agriculture and allied sector was buoyant over the past several years, due to the measures taken by the government to augment crop and livestock productivity, ensure certainty of returns to farmers through price support, promote crop diversification, improve market infrastructure through the impetus provided for the setting up of farmer-producer organisations and promotion of investment in infrastructure facilities through the Agriculture Infrastructure Fund.
- Private investment in agriculture rose to 9.3 percent in 2020-21. Institutional credit to the agricultural sector continued to grow to Rs 18.6 lakh crore in 2021-22
- The minimum support price for all mandated crops was fixed at 1.5 times of the all-India weighted average cost of production from 2018. Foodgrain production in India saw sustained increase and stood at 315.7 million tonnes in 2021-22.

Industry

- Overall gross value added by the industrial sector (for the first half of 2022-23) rose 3.7 percent, which is higher than the average growth of 2.8 per cent achieved in the first half of the last decade.
- Robust growth in private final consumption expenditure, export stimulus during the first half of the year, increase in investment demand triggered by enhanced public capex and strengthened bank and corporate balance sheets provided a demand stimulus to industrial growth.
- Credit to micro, small and medium enterprises has grown by an average of around 30 percent since January 2022 and credit to large industry in double digits since October 2022.
- Electronics exports rose nearly threefold, from $4.4 billion in 2018-19 to $11.6 billion in 2021-22.
- India became the second-largest mobile phone manufacturer globally, with the production of handsets rising to 29 crore units in 2020-21 from 6 crore units in 2014-15.
- The production-linked incentive (PLI) schemes were introduced across 14 categories, with an estimated capex of Rs 4 lakh crore over the next five years, to plug India into global supply chains. Investment of Rs 47,500 crores has been seen under the PLI schemes in 2021-22, which is 106 percent of the designated target for the year. Production/sales worth Rs 3.85 lakh crore and employment generation of three lakh have been recorded due to PLI schemes.
- Over 39,000 compliances have been reduced and more than 3,500 provisions under various laws decriminalised as of January 2023.

Services

- The services sector is expected to grow at 9.1 percent in 2022-23, as against 8.4 percent in 2021-22.
- India was among the top ten services exporting countries in 2021, with its share in world commercial services exports increasing from 3 percent in 2015 to 4 percent in 2021.
- Contact-intensive services are set to reclaim pre-pandemic-level growth rates in 2022-23. Hotel occupancy rates have improved from 30-32 percent in April 2021 to 68-70 percent in November 2022. The tourism sector is showing signs of revival, with foreign tourist arrivals in India growing month-on-month.
- Sustained growth in the real estate sector is taking housing sales to pre-pandemic levels, with a 50 percent rise between 2021 and 2022.
- India’s e-commerce market is projected to grow at 18 percent annually through 2025.

External sector

- Merchandise exports were $332.8 billion for April-December 2022. India diversified its markets and increased its exports to Brazil, South Africa and Saudi Arabia.
- India entered into a comprehensive economic partnership agreement with the United Arab Emirates and an economic cooperation and trade agreement with Australia in 2022.
- India continued to be the largest recipient of remittances in the world, netting $100 billion in 2022. Remittances are the second-largest major source of external financing after service exports.
- As of December 2022, forex reserves stood at $563 billion covering 9.3 months of imports. As of end-November 2022, India was the sixth-largest foreign exchange reserves holder in the world.