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Why in the news?

The Economic Survey 2022–23 was presented by the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman.

This year's Economic Survey's main argument is that the Indian economy has recovered from the COVID disruption and is prepared to continue growing as it did after 2003. 

What is the Economic Survey?

• Every year, the survey is presented to give a thorough analysis of the state of the economy in the country.
• It is prepared by the Department of Economic Affairs (DEA) Economic Division, working under the direction of the Chief Economic Advisor (CEA).
• During the budget session, it is presented to the Parliament each year. 
• It is typically presented by the Finance Minister one day before the Union Budget's presentation in Parliament.
• The report is divided into chapters covering various topics, including government finances, agriculture, unemployment, and the nation's infrastructure. 
• It offers an in-depth, official account of the Indian economy.
• Every chapter examines potential futures and offers an outlook.
• The government or the union budget is optional to implement the comments or policy recommendations in the survey.

Takeaways from Economic Survey

• GDP growth
• The Economic Survey 2022-23 predicts that the real GDP will increase the baseline GDP growth of 6.5 per cent in FY24. 
• Estimates of growth for FY23 are higher than for almost all major economies.
• The report noted that India's growth is marginally higher than the country's economy's average growth during the decades preceding the pandemic.
• In 2023–2024, India's GDP will grow by 6.0–6.8 per cent, depending on the direction of global economic and political trends. 
• The capital investment cycle is anticipated to start in India with the strengthening of the corporate and banking sectors' balance sheets in FY24, which will result in rapid growth due to active credit disbursement. 
• The development of open-source digital infrastructure and ground-breaking initiatives like PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive programs to increase manufacturing output will contribute to economic growth.
• The optimistic growth predictions are based on a number of favourable factors, including the recovery of private consumption, boosting production activity, and higher capital expenditure (Capex).
• Inflation
• The RBI has projected headline inflation at 6.8 percent in FY23, which is outside its comfort zone (threshold) of 2 per cent to 6 per cent.
• High inflation is seen as a significant factor holding back demand among consumers. 
• The report sounds optimistic about the inflation levels and trajectory saying, "it is not high enough to deter private consumption and also not so low as to weaken the inducement to invest."
• Despite the three shocks of COVID-19, the Russian-Ukrainian conflict, and central banks around the world, led by the Federal Reserve, raising policy rates in unison to combat inflation, which caused the US dollar to strengthen and the current account deficits (CAD) in net importing economies to widen, agencies around the world continue to project India as the fastest-growing major economy at 6.5-7.0 per cent in FY23. 

• Unemployment
• The survey indicates that employment levels have increased in the current fiscal year. Job creation has risen with the initial surge in exports, a powerful release of the pent-up demand, and a speedy rollout of the capex.
• According to the PLFS (Periodic Labour Force Survey), the urban unemployment rate for those 15 years of age and older fell from 9.8% in the quarter ending in September 2021 to 7.2 percent a year later.
• The survey also emphasizes that a rise in the labour force participation rate coincides with a decline in the unemployment rate.  

Challenges in the Indian Economy

These are the six challenges that are facing the global economy–

• COVID-19-related disruptions; the Russian-Ukrainian conflict and its negative effects; disruptions in the supply chain, primarily for food, fuel, and fertilizer; and the central banks across economies responding with synchronized policy rate hikes to control inflation, leading to an appreciation of the US dollar and the widening of current account deficits (CAD) in net importing economies.
• Due to fears of global stagflation, countries have felt compelled to defend their economic spheres, which has slowed cross-border trade and impacted overall growth.
•  Due to its policies, China experienced a significant slowdown. 
• The pandemic's scarring caused by the loss of educational and income-generating opportunities poses a medium-term threat to growth.

Outlook for 2023-24

• India's recovery from the pandemic happened fairly quickly, and growth in the upcoming year will be aided by strong domestic demand and increased capital investment.
• The report claims that the private sector is starting to demonstrate signs of a new capital formation cycle, aided by solid financials. More importantly, the government has significantly increased capital spending to make up for the private sector's conservatism.
• According to the IMF's World Economic Outlook, published in October 2022, global growth will slacken from 3.2 percent in 2022 to 2.7 percent in 2023. 
• Trade growth will be constrained by slower economic output growth and elevated uncertainty. 
• This can be seen in the (WTO) World Trade Organization's revised forecast for global trade growth, which drops from 3.5 percent in 2022 to 1.0 percent in 2023.
• Borrowing costs may remain "higher for longer" due to entrenched inflation, which could extend the tightening cycle. In this case, the global economy might experience weak growth in FY24.  
• However, there are two benefits to a scenario of slow global growth: oil prices will remain low, and India's CAD will perform better than anticipated. The overall external situation will continue to be under control.