Economic survey 2022-2023

• The Economic Survey 2023, which the Finance Minister presented to Parliament, painted a positive picture of the prospects for the Indian economy and declared that the pandemic-related doldrums were ended.
• India's economic recovery from the epidemic is complete, according to the Economic Survey 2022–23, and economic growth in the range of 6% to 6.8% is predicted for the upcoming fiscal year 2023–24.

About the Economy Survey:

• It offers a thorough assessment of the status of the national economy for the year that is about to end (2022-23) with projections for the next fiscal year, covering everything from infrastructure to agriculture and unemployment (2023-24).
• Under the direction of the Chief economic adviser, the Economic Division of the Department of Economic Affairs (DEA), Ministry of Finance, prepares it.
• The Finance Minister approves the Survey after it is completed, but the government is not required to follow any of the recommendations or comments made in it.
• It examines the changes to the Indian economy during the preceding 12 months and gives the fiscal year's economic outlook.
• The first Economic survey was presented for 1950-51 and until 1964, it was presented along with the budget.

The highlight of the survey:

GDP growth:

• According to the trajectory of global economic and political changes, India's GDP is expected to expand by between 6.0 and 6.8% in 2023–2024. This is mostly because of:
  • the increase in private consumption,
  • An increase in capital expenditure (Capex),
  • Almost everyone is vaccinated and that lead to Migrant workers' return to cities strengthening corporate balance sheets, and well-capitalized public sector banks are prepared to enhance loan availability to the MSME sector.

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Inflation:

• The RBI predicted it will be 6.8% in FY23, exceeding its comfort range of 2% to 6%.
• The Survey seemed upbeat about the inflation rates, nevertheless.
• Neither too high to discourage private spending nor too low to impair the incentive to invest.
• India witnessed three periods of high consumer price inflation in 2022, due to the conflict between Russia and Ukraine and food shortages brought on by heat waves in some regions of the nation, inflation during the first phase, which lasted from January to April, peaked at 7.8%.
• The Reserve Bank of India and the government took swift steps to reduce the inflation, which dropped to 5.7% by December.
• In the near future, the RBI predicts higher domestic prices for milk, spices, and cereals, mostly as a result of supply constraints and rising feed costs.
• The likelihood of greater food prices is rising as a result of global climate change.

Employment-Unemployment:

• According to the PLFS (periodic labour force survey), the urban unemployment rate for those 15 years of age and over fell from 9.8% in the quarter ending September 2021 to 7.2% the following year. In spite of layoffs, Indian entrepreneurs increased the number of direct positions by 36% in 2022.this trend was mainly due to:
  • An increase in the rate of labour force participation
  • The initial increase in exports
  • A significant release of "pent-up" demand
  • A quick implementation of the capital expenditure.
• eShram Portal: As of December 31, 2022, more than 28.5 crore workers had enrolled on the eShram portal, which was established to construct a nationwide database of unorganised labourers.
• The JAM trinity and Direct Benefit Transfer (DBT) have empowered marginalized individuals by integrating them into the formal financial system.

Economic Performance in Climate Change and Environment:

• The chapter on "Climate Change and Environment" in the Economic Survey 2022–23 outlines India's nationally determined contributions (NDCs), which include the switch to renewable energy sources, the pledge to reach "Net Zero" emissions by 2070, and the actions taken to attain energy independence.
• Performance and Objectives: India has also agreed to cut its GDP's emissions intensity by 45% from 2005 levels by 2030.
• Another goal is to generate around 50% of the existing electric power capacity by 2030 from sources other than fossil fuels.
• India has already surpassed its goal of having 40% of its installed electric capacity come from non-fossil fuels before 2030, and it is anticipated that by that time, installed non-fossil fuel capacity will have exceeded 500 GW.
• By 2029–2030, the average emission rate would decrease as a result by about 29%. (compared to 2014-15).
• At the UNFCCC COP26 Glasgow climate summit, the LiFE- Lifestyle for Environment movement was officially introduced.
• India's first framework for sovereign green bonds (SGrBs) was released in November 2022. The RBI sold two lots of 4,000 crore SGrBs.
• The poll also emphasised India's aspirations to rely on Green hydrogen as part of the National Green Hydrogen Mission in order to achieve energy independence by 2047.
• The study demonstrates that India is emerging as a preferred location for renewable energy, with investments totaling USD 78.1 billion over the previous seven years.
• As of October 2022, the installed solar power capacity—a crucial indicator for the National Solar Mission—was 61.6 GW.

Health:

• According to budget estimates, India's budgeted spending on the health sector accounted for 2.1% of GDP in FY 2023 and 2.2% in FY 2022. (revised estimates).
• 2.5% by 2025 was suggested by both the 15th Finance Commission and the National Health Policy of 2017.
• The nationwide Covid-19 immunisation programme, Aatmanirbhar Bharat Abhiyaan, and Intensified Mission Indradhanush (MI) program's costs are to blame for the increase in the government's portion of total health spending.
• The reduction in out-of-pocket expenses which survey mentions
• Less than half of the 50 crore beneficiaries of the Ayushman Bharat Jan Arogya Yojana (AB-JAY) scheme's initial aim were reached.

Education:

• During the same seven-year period, the budgetary allocation for education experienced just a slight increase of 0.1 percentage points, from 2.8% to 2.9% of the total GDP. A decrease in government spending while an increase in spending on social services.
• The Dropout rates in basic and upper primary schools get worse under COVID as well as the Enrollment in higher education grew as mentioned in survey.

Agriculture and Food Management:

• Over the past six years, India's agriculture industry has experienced a strong average annual growth rate of 4.6%. As a result, agriculture was able to make a considerable contribution to the nation's overall development, growth, and food security.
• Performance: India has become a net exporter of agricultural goods in recent years, with exports reaching a record USD 50.2 billion in 2021–22.

The following government actions led to the agri sector's brisk growth:

• Increase in agriculture and animal productivity,
• MSP is set at 1.5 times the country-wide weighted average cost of production for all specified crops.
• encouraging the variety of crops,
• mechanisation and encouragement of organic farming,
• In 2020–21, private investment in agriculture climbed to 9.3%.
• In 2021–2022, institutional loans to the agricultural sector increased even more, reaching Rs. 18.6 lakh crore.
• In India, the production of food grains increased steadily and reached 315.7 million tonnes in 2021–22.
• According to the First Advance Estimates for 2022–23 (Kharif only), the nation's total foodgrain production is predicted to be 149.9 million tonnes, which is more than the average for the preceding five years' Kharifs (2016-17 to 2020-21).
• Additionally, the GoI recently decided to offer recipients of the NFSA 2013 free foodgrains for a year starting on January 1, 2023.
• A competitive, transparent online bidding system has been implemented by the National Agriculture Market (e-NAM) Scheme to guarantee that farmers receive fair prices for their products (covering 1.74 crore farmers and 2.39 lakh traders).

Service sector:

• India is ranked among the top 10 nations that export services in 2021.
• Exports of business services will rise from 3% in 2015 to 4% in 2021.
• In FY23, the Indian services sector is predicted to increase by 9.1%, up from FY22's 8.4% (YoY) growth rate.
• The housing market experienced consistent expansion, reaching pre-pandemic levels with a 50% increase between 2021 and 2022.
• With an increase in foreign visitor arrivals in FY23, the hotel occupancy rate in the tourism sector increased from 30–32% in April 2021 to 68–70% in November 2022, exhibiting signs of resurgence.
• At pre-pandemic levels, contact-intensive services like hospitality, tourism, retail trade, entertainment, and recreation have seen a sequential growth of 16%.

Forecast for 2023–2024:

• According to the survey, the baseline GDP growth rate for FY24 was 6.5% in real terms.
• It did, however, outline certain negative risks.
• For instance, the weak global economy may result in low demand for Indian exports, which would increase India's trade imbalance and cause the rupee to weaken. Similar to this, continued monetary tightening—which results in higher interest rates—could slow down economic growth in FY24.

Industry: steady improvement:

• In addition to contributing significantly to the GDP at 31%, the sector is expected to directly or indirectly employ up to 12.1 crore people in the fiscal year 2023.
• Innovative strategies to increase manufacturing output include PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive programmes.
• Since July 2021, the Purchasing Managers Index (PMI) and Index of Industrial Production (IIP) have both been growing steadily.
• Both MSMEs and major industries have experienced double-digit growth, with MSMEs increasing by 30% since January 2022.
• India is now the world's second-largest maker of mobile phones, and its exports of electronics have increased by over three times, from US $4.4 billion in FY19 to US $11.6 billion in FY22.

Digital infrastructure:

• More than a billion people will have unique digital IDs by 2022, more than 80% will have bank accounts, and more than 600 billion digital payment transactions will have been made monthly. During the epidemic age, digital infrastructure has contributed to strong growth.
• Digital infrastructure can boost GDP growth by 60 to 100 basis points.
• The government's plans for building physical infrastructure include PPPs, a national infrastructure pipeline, a national monetization pipeline, etc.
• Between 2019 and 22, UPI-based transactions increased in volume (115%) and value (121%), paving the door for its global adoption.
• According to Economic Survey, the introduction of 5G services marked a significant development in Indian telecoms.
• In order to enable quick 5G rollout, the Indian Telegraph Right of Way (Amendment) Rules, 2022 would make it easier and faster to instal telegraph infrastructure.
• The autonomous public service broadcaster of India, Prasar Bharati, reaches 99.1% of the country's population and 92% of its total area by broadcasting in 23 languages and 179 dialects from 479 stations.
• With 120 government programmes, 262 videos, and 1520 articles published on the National AI Portal, "Bhashini" is seen as a tool for overcoming the language barrier.

Shipbuilding:

• To date, Indian shipyards have built more than 130 warships, and now, 41 of 43 ships and submarines are being built there in both the public and commercial sectors.
• In isolated, coastal, and rural places, shipbuilding has one of the largest employment multipliers and can produce large amounts of employment.

Financial Intermediation and Monetarization:

• The repo rate has increased by 225 basis points since the Reserve Bank of India (RBI) began its monetary tightening cycle in April 2022.
• As a result, financial institutions' balance sheets have improved and their excess liquidity has decreased, making loans easier for them to make.
• It is anticipated that the increase in private capital spending will support the expansion in credit offtake and keep it going, kicking off a positive investment cycle.

Performance and Development:

• The capital-to-risk weighted assets ratio (CRAR) of SCBs (scheduled commercial banks) is still at a robust 16.0 and the gross non-performing assets (GNPA) ratio has fallen to a seven-year low of 5.0.

Startups:

• Despite layoffs, the number of direct employment they created last year increased by 36% to over 2.7 lakh.
• From 452 in 2016 to 84,012 in 2022, the Department for Promotion of Industry and Internal Trade's (DPIIT) list of startups has grown.
• Start-ups are seen as the backbone of the "new India" since they inspired young people to create jobs rather than just look for them.

External Sector:

• India's external industry has been experiencing significant international headwinds as a result of recent geopolitical developments.
• But India has broadened its consumer base and grown its exports to Saudi Arabia, South Africa, and Brazil.
• Performance: In contrast to a deficit of US$ 9.7 billion (1.3% of GDP) in Q2 of FY22, India's current account balance (CAB) reported a deficit of US$ 36.4 billion (4.4% of GDP) in Q2 of FY23.
• This was primarily caused by an increase in the net investment income outgo and a greater merchandise trade imbalance of US$83.5 billion.
• India inked ECTA with Australia and CEPA with the UAE in 2022 to broaden its market and achieve improved penetration.
• India will receive US$ 100 billion in remittances in 2022, making it the largest recipient in the world.
• After service export, remittances are the second-largest source of external financing.
• India had $563 billion in foreign exchange reserves as of December 2022, enough to cover 9.3 months of imports (this is a decline from 13 months of imports in FY 21-22).
• India yet held the sixth-largest amount of foreign exchange reserves in the world.

Electronics:

• Given the improvement in manufacturing and export during the last five years, India's electronics industry is on the "correct trajectory" to reach $300 billion in electronics manufacture and $120 billion in exports by FY26.
• India is now the world's second-largest maker of mobile phones.
• Domestic businesses like Tata have expressed interest in setting up semiconductor production facilities in the nation.

Main focus of economy survey:

• This year's Survey is focused on the fact that India's economy has recovered from the effects of Covid and is finally poised to see strong and consistent growth in the years to come.
• The CEA V Anantha Nageswaran claims that the BJP government's tenure from 2014 to 2022 saw important structural and governance improvements that increased the economy's effectiveness.
• Due to businesses cutting back on debt and banks clearing out non-performing assets, these measures did not yield the intended effects right away. The Covid epidemic and the Ukraine war also had an influence.
• However, the Survey forecasts that once these shocks pass, the Indian economy would expand at its full capacity, comparable to the growth seen after 2003, making its outlook more favourable than it was before to the pandemic.

Challenges:

• There is still uncertainty because the survey indicates that while internal drivers are still robust, external forces are primarily to blame for India's growth weaknesses.
• The Survey concluded that the scenario in 2023 is comparable to that in 2003 because the time between 2014 and 2022 is comparable to the years 1998 to 2002, when the Indian economy underperformed in growth returns despite fundamental government changes.
• This was brought on by transient shocks like the US sanctions following India's nuclear test, two back-to-back droughts, the end of the tech bubble, etc. However, as these shocks subsided, the structural reforms began to produce growth benefits in 2003.

What is the 2003 reference?

• The Survey claimed that the state of the economy in 2023 is comparable to where it was in 2003.
• It said that the years between 2014 and 2022 are comparable to those between 1998 and 2002, when the Indian economy lacked growth returns despite the government's (also led by the BJP) revolutionary reforms.
• This was brought on by transient shocks like the US sanctions following India's nuclear test, two back-to-back droughts, the end of the tech bubble, etc.
• However, as these shocks subsided, the structural reforms began to produce growth benefits in 2003. According to the survey, the same scenario will resume in 2023.

Conclusion:

• Despite obstacles, the Indian economy has "renewed" and "re-energized" what had slowed down owing to the pandemic, and has practically "recouped" what it lost in 2022–2023.