The Centre has chosen to be conservative in making its growth estimates for the current fiscal with the Economic Survey for 2023-24 projecting a real GDP growth of 6.5-7 per cent in 2024-25 which is in sharp contrast to the more robust estimate of 7.2 per cent by the RBI. It is also sharply down from the 8.2 per cent growth in 2023-24.

Finance minister Nirmala Sitharaman, who tabled the Economic Survey, will present the Union budget in the Lok Sabha on Tuesday morning.

“The Survey conservatively projects a real GDP growth of 6.5-7 per cent, with risks evenly balanced, cognizant of the fact that the market expectations are on the higher side,” the pre-budget document said.

The survey, authored by chief economic advisor V. Anantha Nageswaran, said the conservative outlook reflects concerns about global headwinds, even as India boasts a robust post-pandemic recovery.

While GDP is nearly 20 per cent higher than pre-pandemic levels, the survey identifies potential threats.

Escalating geopolitical tensions could disrupt supply chains and reignite inflation. A resurgence of protectionism globally could hamper India’s merchandise trade, impacting the external sector.

The survey also warns of a potential correction in the Indian stock market, currently fuelled by high retail investor participation. This could negatively impact household finances and corporate valuations.

“The survey’s projection of continued strong growth in FY25, rightly comes with caution of the impact of global headwinds leading to challenges such as supply dislocations and higher commodity prices,” Yezdi Nagporewalla, CEO, KPMG in India, said.

“However, an overall positive global trade outlook for 2024, gives us the hope that the budget will make the most of this opportune time to further accentuate India’s positive economic prospects,” he said.

Ranen Banerjee, partner and leader economic advisory, PwC India, said the CEA has sounded a cautious note by projecting a growth rate of 6.5-7 per cent for 2024-25, highlighting the global uncertainties and domestic challenges.

“The survey is positive about the India growth story, and I am confident that India’s GDP growth for FY25 will surpass the forecast given in the survey and basis certain conditions, it has the potential to be at 8 per cent,” CII president Sanjiv Puri said.

“We see a very mature take on the outlook for the Indian economy presented today as part of the economic survey. While a projected growth rate of 6.5-7 per cent for the fiscal 2024-25 may appear a bit conservative, we feel that for a country of the size of India and which has been growing at a fast pace, this growth is encouraging,” Ficci president Anish Shah said.

Deficit watch

In a global environment of widening deficits, India stands out for its fiscal prudence.

The government has managed to bring down the fiscal deficit from 6.4 per cent of GDP in 2022-23 to 5.6 per cent in 2023-24.

The survey credits this achievement to prudent fiscal management, which has helped maintain macroeconomic stability and keep sovereign debt sustainable. The report projects a further decline in the deficit, reaching 4.5 per cent of GDP or lower by 2025-26.

A normal rainfall forecast by the India Meteorological Department and the satisfactory spread of the southwest monsoon thus far are likely to improve agriculture sector performance and support the revival of rural demand.

However, the monsoon season still has some way to go, the document said, adding that structural reforms such as the GST and the IBC have also matured and are delivering envisaged results.

The survey said domestic growth drivers have supported economic growth in 2023-24 despite uncertain global economic performance.

Improved balance sheets will help the private sector cater to strong investment demand.