NEW DELHI: India is projected to grow by 6.6 per cent in 2023-24, significantly higher than the corresponding growth prospects for the US, the UK, and the OECD region at 1.8 pc, 4.4 pc and 2.8 pc, respectively, according to the Organisation for Economic Cooperation and Development (OECD).
CPI inflation in India is projected at 6.8 pc for the next fiscal, much lower than the corresponding forecasts for the US, the UK, and the OECD region, said the OECD Economic Outlook.
Although the majority of currencies depreciated against the US dollar in 2022, YEN and GBP depreciated more at 13.4 pc and 10.7 pc, respectively, between April and November 2022, compared to Indian Rupee at 7.4 per cent, it said.
According to the RBI’s Professional Forecasters Survey (December 2022), India’s current account deficit is projected at 3.5 per cent of GDP in fiscal 2023 and its general government fiscal deficit is expected to be at 9.6 pc of GDP.
The current account deficit largely depends on global economic recovery, while the Government borrowing requirements would depend on determined fiscal correction. The forthcoming Budget provides the Government with an opportunity to spell out a credible fiscal consolidation path.
A distinguishing feature of India’s growth experience of this year and the full year of last fiscal has been the large excess of nominal growth over real GDP growth, reflecting the high implicit price deflator (IPD)- based inflation. In 2021-22, real and nominal GDP growth was 8.7 pc and 19.5 pc, respectively, implying that nominal growth exceeded real growth by 10.8 pc points. In the first half current fiscal, real GDP growth was at 9 pc while nominal growth was at 21.2 pc, indicating an excess of 12.2 pc points. For the second half, these trends are likely to continue, although they may be somewhat moderated.
The RBI expects growth in next fiscal at 6.8 per cent. Although it does not provide a projection for nominal GDP growth, as per EY estimates, based on current inflationary trends, it may be close to 17 pc in the current year. In next fiscal, real and nominal GDP growth is expected to be close to 6.5 pc and 14 pc, respectively.
Gross tax revenues
After losing significant ground in terms of growth in FY20 and FY21, the Government’s gross tax revenues (GTR) grew by nearly 34 pc in FY22, reflecting a large base effect. A strong growth in GoI’s tax revenues is also visible in FY23, at least during the first seven months for which data are available.
Even if the revenue trends are slightly moderated in the latter part of the fiscal, the Government’s GTR is expected to show a growth of 15.3 per cent assuming a buoyancy of 0.9 and an estimated nominal growth of 17 per cent.
This level of GTR growth may be consistent with a normalising GDP growth, although even this reflects, to some extent, the effect of the excess of the nominal over real growth.