According to the Economic Survey, the Indian economy is projected to grow by 6.5% in real terms in FY24 or 2023-2024 due to increased domestic demand and an increase in capital investment. The nominal GDP growth rate is anticipated to be around 11%, implying a 4.5% average annual rate of inflation for the upcoming fiscal year.
The Economic Survey elaborated on its concerns by stating that multiple sources pose risks to the current account balance, including a higher import bill as a result of optimistic growth prospects amid high commodity prices and global commodity prices remaining above pre-conflict levels. This may be made worse by a plateau in India’s exports as a result of slower global demand.
In addition, it is likely that the growth rate for the upcoming fiscal year, 2022-23, will be 7%. This is higher than the Reserve Bank of India’s 6.8% growth forecast in its December 7, 2022 monetary policy.
According to sources, India’s 7% growth in 2022 and 2023 is higher than that of most major global economies and even slightly higher than the average growth rate of the Indian economy during the pandemic.
According to sources, the higher growth occurs despite the three shocks of COVID-19, the conflict between Russia and Ukraine, synchronized monetary policy tightening by most central banks, which led to an appreciation of the dollar, and an expanding current account deficit for countries that import net amounts, such as India.
However, sources claimed that the Survey issued a disclaimer regarding the ongoing difficulty posed by the rupee’s depreciation as a result of the US Federal Reserve’s subsequent rate hikes. As long as commodity prices remain high and India’s growth momentum remains strong, this will result in a larger current account deficit.