Indian economy to grow 6.5% in FY24; CAD may widen further: Economic Survey

Indian economy to grow at 6.5 per cent in 2023-24, according to the Economic Survey tabled in the Parliament by finance minister Nirmala Sitharam. It said that in current year, the economy is projected to grow by 7 per cent. It will remain the fastes growing major economy in the world. 

It added that India is third-largest economy in the world in PPP (purchasing power parity) terms and fifth largest in terms of exchange rate.  

"Economy has nearly recouped what was lost, renewed what had paused; re-energised what had slowed during the pandemic

Also, in FY22, India grew at 8.7 per cent, it added.

"India withstood an extraordinary set of challenges better than most economies," it said. 

India's economy has rebounded since the Covid-19 pandemic, but the Russia-Ukraine conflict has triggered inflationary pressures and prompted central banks, including India's, to reverse the ultra-loose monetary policy adopted during the pandemic.

The survey said the pace of price increases is not high enough to deter private consumption or low enough to weaken investment, even though it remained above the central bank's inflation target in FY23.

The survey said noted that "the current account deficit (CAD) may continue to widen as global commodity prices remain elevated, but the economic growth momentum stays strong. If CAD widens further, the rupee may come under depreciation pressure. However, the overall external situation will remain manageable."

"India has sufficient forex reserves to finance CAD and intervene in the forex market to manage rupee volatility," it said. 

The survey also added that the downside risks to the global economic outlook remain elevated as inflation persists in advanced economies and the central banks are expected to keep raising the key interest rates. 

"Challenge to rupee depreciation persists with the likelihood of further interest rate hikes by the US Fed," it said. 

It added that borrowing cost may remain "higher" for a longer period and entrenched inflation may prolong tightening cycle.

The Survey further added that the Emergency Credit Linked Guarantee Scheme shielded India's micro, small and medium enterprises from financial distress, with their quick recovery supported by "remarkably high" credit growth, reflected in the rise of goods and services tax paid by the units.