Navigating through the Economic Landscape of 2023-243 min read
As the anticipation for the upcoming 2024-25 budget builds, let’s reflect on India’s economic journey in the past year. Despite facing challenges, India has emerged stronger, setting the stage for accelerated growth ahead. In the previous budget, the Government of India outlined seven guiding pillars, or ‘Saptarishi,’ to shape the Union Budget 2023:
- Inclusive Development
- Reaching Last Mile
- Infrastructure Investment
- Unleashing Potential
- Green Growth
- Youth Power
- Financial Sector
We’ll now delve into a detailed assessment to determine whether the government lived up to its promises across these pillars.
Exploring the Economic Landscape of 2023: Growth, Resilience, and Challenges-
As we delve into the effectiveness of the previous budget, let’s decipher the defining narratives of the Indian economy in 2023. Key data points across various sectors will provide a comprehensive lens to evaluate the budget’s impact.
Highlights:
- Global Champion: Indian economy has been ranked the world’s fastest-growing major economy for three years running, and India continues to attract investor confidence.
- Economic Strength: GDP reached US$3.75 trillion (5th largest globally) and is projected to hit US$5 trillion by 2027 (RBI).
- Resilient Growth: FY 2023-24 growth is estimated at 7.3%, exceeding the previous year’s 7.2%.
- Sectoral Performance: All the economic sectors have fared well by witnessing more than 6% growth, except for the agriculture and allied sectors, for which the estimated growth is 1.8%. The construction sector has been estimated to have double digits growth of 10.7%.
- Financial Stability: The government is on track to achieve the 5.9% fiscal deficit target. Healthy capital market activity with record IPOs and strong SIP inflows.
Hits:
- Sustained Growth Momentum: India retains its title as the world’s fastest-growing major economy, showcasing robust 7.3% GDP growth.
- Economic Diversification: Most economic sectors, except agriculture, witness growth exceeding 6%, with construction leading at 10.7%.
- Fiscal Responsibility: The government is projected to achieve a 5.9% fiscal deficit, reflecting sound financial management.
- Capital Market Buoyancy: Record IPOs and thriving capital markets underscore investor confidence.
- Bank Sector Revival: Signs of recovery in the banking sector with reduced NPAs and resolutions through bankruptcy processes.
Misses:
- Inflationary Pressures: CPI volatility remains a challenge, driven by food inflation.
- Rural Demand Stagnation: Targeted interventions are needed to revive rural demand and unlock the agricultural sector’s potential.
- Limited Private Sector Investment: Private sector investment remains concentrated, necessitating broader participation for balanced growth.
- Slow Divestment: The government struggles to achieve divestment targets, having achieved around Rs 10,000 cr as of Dec 13, 2023, against the Rs 51,000 cr target.
Challenges Remain:
- Inflationary Pressures: CPI (retail inflation) volatility, fueled by food inflation, warrants attention because it remains above the RBI’s target band of 4% to 6%. .
- Rural Demand Stagnation: Targeted interventions are needed to revive rural demand and unlock the agricultural sector’s potential.
- Limited Private Sector Investment: Broader participation is required for balanced growth.
- Slow Divestment: The government struggles to meet divestment targets, having achieved around Rs 10,000 cr as of Dec 13, 2024, against the Rs 51,000 cr target.
Outlook:
Despite challenges, India’s economic prospects are promising. With anticipated global improvements, the country is poised for a new growth trajectory in 2024-25. The upcoming interim budget (Vote of Account) and the next full-fledged union budget following general election will be critical in addressing identified misses and optimizing policies to sustain economic momentum.
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