“Despite external exogenous shocks, India's economy is relatively insulated from global spillovers compared to other EMEs, partly because of its large domestic market and relatively looser integration in global value chains and trade flows” stated the ‘Statements of Fiscal Policy’ presented by Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman along with Union Budget 2023-24 in Parliament today.

According to the Fiscal Policy statements the Nominal GGP is projected to grow at 15.4 % year-on-year (Y-o-Y) in FY2022-23 as against 19.5% in 2021-22. The real GDP is projected to grow by 7% (Y-o-Y) relative to 8.7% in 2021-22.

Robust Agriculture sector growth

Fiscal policy statements highlighted that Indian agriculture sector is projected to grow by 3.5 per cent in FY 2022-23. Apart from meeting domestic requirements, India has also rapidly emerged as the net exporter of agricultural products in recent years. With the agriculture exports touching $50.2 Bn in FY 2022-23. The total kharif food grain production in the country is estimated at 149.9 million tonnes higher than the average Kharif food grain production of the previous five years. Although, the area sown under paddy was about 20 lakh hectares less than compared to 2021.

The growth in the agriculture sector is likely to remain buoyant, supported by healthy progress in Rabi sowing, with the area sown being higher than the previous year. This has led to a recovery in the rural economy

Industry – engines of growth

The industry sector to witness modest growth of 4.1 per cent in FY 2022-23 relative to 10.3 per cent in FY 2021-22. The domestic auto sales registered Y-o-Y growth of 5.2 % in December 2022 and robust domestic tractor, two and three-wheelers sales during Q3 of FY 2022-23 which also signified improvement in rural demand.

Services - driver of growth

The services sector to rebound with y-o-y growth of 9.1% in FY 2022-23 over 8.4 % in 2021-22. The Rebound in consumption has been driving by the pent-up demand for contact-intensive services which was followed by world’s largest vaccination programme. On the demand side, private consumption has witnessed continued momentum. It is estimated to grow at 7.7 per cent in FY 2022-23 compared to 7.9 per cent in FY 2021-22.

Exports

Exports are estimated to grow at 12.5 per cent in FY 2022-23 despite sustained supply chain disruptions and an uncertain geopolitical environment. The share of exports in GDP (at 2011-12 prices) also increased to 22.7 per cent in FY 2022-23 compared to 21.5 per cent in FY 2021-22.

Growth outlook

The Statement of Fiscal Policy observed that Growth in FY 2023-24 will be supported by solid domestic demand and a pickup in capital investment. The current growth trajectory will be supported by multiple structural changes like IBC and GST that have enhanced the efficiency and transparency of the economy and ensured financial discipline and better compliance.

India's public digital infrastructure expansion is leading to accelerated financial inclusion for low-income households, micro and small businesses, and the economy's rapid formalization. Together these two factors - balance sheet strength and digital advancement - are growth differentiators not only for FY 2023-24 but also in the years ahead.

The path-breaking policies such as the PM Gati Shakti, National Logistics Policy and the PLI schemes will strengthen the infrastructural and manufacturing base while bringing down costs in the value chain a strong foundation for sustained economic growth and improved resilience.

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