The Economic Survey for 2022-23 has forecast a real GDP growth rate of 6.5 percent for the next financial year, in a range of 6-6.8 percent. And even though we are two months away from the start of 2023-24, the forecast feels out of reach.
In fact, if one looks at the growth forecasts made by the last five Economic Surveys, they have all been missed.
Over the last five years, actual GDP growth has missed the midpoint of the Economic Survey's forecasts by a massive 409 basis points on average.
One basis point is one-hundredth of a percentge point.
Even if one excludes 2020-21, the forecast for which was made just before the coronavirus pandemic struck and led to the Indian economy contracting by a record 6.6 percent, GDP growth has undershot Survey estimates by 190 basis points on average starting from 2018-19.
Economists think more of the same can be expected in 2023-24.
According to India Ratings, the Survey's assessment of next year's growth "appears to be optimistic".
"A glance at the first advanced estimate of 2022-23 GDP clearly indicates that the growth momentum witnessed in April-September 2022 is unlikely to sustain in October 2022-March 2023 and the GDP growth is expected to drop to 4.5 percent in October 2022-March 2023 from 9.7 percent in April-September 2022," India Ratings said.
In fact, India Ratings thinks the few positives currently visible are "still not sufficient" to push next year's growth past 6 percent.
Rajani Sinha, chief economist with CareEdge, is in agreement, and thinks GDP growth will come in at 6.1 percent in 2023-24.
Admittedly, this year's Survey admits the downside risks to its forecast.
In his media briefing on January 31, Chief Economic Adviser V Anantha Nageswaran said that while the baseline growth forecast is 6.5 percent, the range of 6 percent to 6.8 percent is deliberately asymmetric given the global uncertainties.
A baseline GDP growth forecast of 6.5 percent would have a symmetric range of 6-7 percent or 6.1-6.9 percent, depending on the width of the range.
"We believe that over-optimism on growth may limit the extent of potential expenditure consolidation and boost revenue projections in the 2023-24 Budget. This in turn would make it difficult for the government to fiscally 'walk the walk' if growth prospects disappoint, as we expect," Nomura economists Aurodeep Nandi and Sonal Varma noted.
Nomura thinks the Indian economy will grow by only 5.1 percent in 2023-24.
