Economic Survey 2023: FY24 baseline GDP growth seen at 6.5%

Earlier on January 31, Moneycontrol had reported the Survey would forecast a GDP growth of 6-6.8 percent for the next financial year, citing government sources.

The real growth forecast for next year, as per the Economic Survey, is slightly higher than estimates of most economists from outside the government. According to economists, the Indian economy will slow down next year on account of domestic demand being hit by the Reserve Bank of India's (RBI) 225 basis points worth of repo rate hikes in 2022 to bring down elevated inflation levels.

Growth is also expected to slow down due to weakness in external demand. Signs of the impact are already visible, with merchandise exports contracting on a year-on-year basis in two of the last three months, with November seeing a minor 0.6 percent increase.

The RBI, in its September 2022 Monetary Policy Report, had forecast that GDP growth in 2023-24 may be 6.5 percent. This forecast could undergo a revision as early as next week when the Monetary Policy Committee (MPC) announces its interest rate decision on February 8.

While growth is seen slowing down next year, India is seen remaining as one of the fastest growing large economies. Last week, the United Nations — even as it cut its growth forecast for India for 2023-24 by 20 basis points to 5.8 percent — said in its World Economic Situation and Prospects 2023 report that global growth may fall to 1.9 percent in 2023 — one of the lowest rates in recent decades — from the 3.1 percent previously forecast.

Further, the International Monetary Fund said on January 31 in an update to its World Economic Outlook report that the Indian economy remains a "bright spot".

The finance ministry's Budget estimates for next year are not based on the real GDP growth forecast made by the Economic Survey, which is prepared by the chief economic adviser. The Budget estimates will instead be on the basis of the nominal GDP growth the finance ministry will assume for 2023-24.

According to a Moneycontrol poll, economists see the Budget assuming a nominal GDP growth of 10.5 percent for next year, although reports have suggested the finance ministry may assume a growth rate of 11 percent.

The Economic Survey of 2021-22 had predicted India's GDP would grow 8-8.5 percent in 2022-23. However, Russia's invasion of Ukraine less than a month after the Survey's release put paid to those hopes.