Economic Survey 2023: India prepared to grow at its potential once pandemic shocks recede

India’s growth outlook seems better than in the pre-pandemic years, the survey said.

India is expected to grow at its potential pace once the shocks of the pandemic recede, boosting the financial cycle, the Economic Survey 2023 stated.

The survey predicted Asia’s third largest economy would grow 6.5 percent in 2023-24, compared to 7 percent this fiscal year and 8.7 percent in 2021-22

“India is prepared to grow at its potential once the one-off shocks of the pandemic recede, turning the financial cycle upward,” the report presented in Parliament by Finance Minister Nirmala Siharaman said.

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Together with the waning of the health and economic impact of the pandemic, higher investment and consumption and a healthy financial system will contribute to higher growth in the coming years while ensuring efficient credit provisioning, the survey said.

It also cited the country’s digital revolution and formalization of the economy, which has given banks far more information about the credit risks of their customers and has improved credit and pricing decisions.

With an underlying emphasis on improving the ease of living and doing business, the report says the reforms that have been put in place were based on the broad principles of creating public goods, adopting trust-based governance, partnering with the private sector for development and improving agricultural productivity.

“Under normal circumstances, reforms of such scale and relevance would have accelerated economic growth. However, largely due to the balance sheet stress caused by the credit boom in the previous years and secondarily due to the one-off global shocks that followed, key macroeconomic variables such as credit growth, capital formation, and hence economic growth were adversely impacted during this period. Further, some reforms deliver results with lagged effects as their diffusion in the economy takes time,” the report said.

The presence of strong medium-term growth magnets has generated optimism that once the global shocks of the pandemic and the spike in commodity prices in 2022 fade away, the Indian economy is well placed to grow faster in the coming decade.

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Additionally, the economy has started benefiting from the efficiency gains resulting from greater formalisation, higher financial inclusion and economic opportunities created by digital technology-based economic reforms.

India’s growth outlook seems better than in the pre-pandemic years, and the economy is prepared to grow at its potential in the medium term, the survey said.