Introduction
In a rapidly evolving global economic landscape, India's economy has shown resilience with promising growth prospects. The recent budget highlights a strategic focus on fiscal consolidation, capital expenditure, and private consumption. It positions India favorably on its pre-pandemic growth trajectory. Here are the key highlights of India’s economic growth over the past few years.
Key Insights
The global economy is expected to grow at 3.2% to 3.3% in the next two years, similar to 2023, with advanced economies expected to outperform developing economies. Indian GDP for FY 2023-24 grew at 8.2% y/y and is expected to grow at 6.5% to 7% in the coming year close to the pre-pandemic trajectory. While the Services sector leads the GDP composition with a 54.7% share, private consumption has been a crucial and steadfast cog in GDP growth in FY2023-24.
Inflationary pressures have seen a downward trajectory recently, though the inflation levels are still above the 4% CPI target set by the RBI.
There has been an overall improvement in the Current Account Deficit, as it stood at 0.7% of GDP in FY 2023-24 as against a deficit of 2% in FY 2022-23.
Net FPI inflows stood at USD 44.1 billion during FY 2023-24 against net outflows in the preceding two years, whereas Net FDI inflows witnessed moderation from USD 42 billion during FY 2022-23 to USD 26.5 billion in FY 2023-24.
Forex reserves, sufficient to cover 11 months of projected imports and INR being one of the least volatile exchange rates show overall stability in the external sector.
The government has followed a path of fiscal consolidation by moderating the growth in revenue expenditure, but at the same time, improving the quality of expenditure by progressively enhancing the share of capital expenditure
Important Budget Proposals
The budget focuses on "Viksit Bharat," emphasizing long-term strategies across multiple sectors, including agriculture, infrastructure, and energy security. With an emphasis on skill development, MSMEs, and the middle class, the government aims to create a broad spectrum of opportunities. Here are some important budget proposals listed.
Set in focus a theme of employment, skilling, MSMEs, & middle class, with a package of schemes & initiatives over a 5-year period with a central outlay of 2 lakh crore. In line with the strategy set out in the interim budget, this budget has outlined sustained efforts on 9 priorities like Agriculture, Employment, Infra, Energy security etc. in pursuit of "Viksit Bharat, for generating ample opportunities for all.
Proposed the highest allocation to the expenditure on Defence, Rural Development, Agriculture & allied activities, Home Affairs & Education. Provision of 11 lakh crore (3.4% of GDP) is made for overall infrastructure development.
While proposing a significant rise in revenue receipts & expenditure, the Government has estimated a fiscal deficit of 4.9% of GDP for FY 2024-25.
Proposed various tax provisions focusing on simplifying taxes, improving taxpayer services, providing tax certainty and reducing litigation while also broadening the tax base to enhance revenues for funding the development and welfare schemes.
Conclusion
With strategic investments and comprehensive reforms, India is poised to navigate the post-budget economy with renewed confidence. The recent budget emphasizes key sectors such as infrastructure, healthcare, education, and technology, ensuring a holistic approach to development. By prioritizing sustainable growth and fostering innovation, the government aims to create a conducive environment for businesses to thrive.
Additionally, reforms in taxation and regulatory frameworks are designed to enhance the ease of doing business, attract foreign investments, and boost domestic industries. This multifaceted strategy not only aims at economic stability but also focuses on inclusive growth, ensuring that the benefits of development reach all sections of society. Through these concerted efforts, India is laying a strong foundation for a future marked by resilience, prosperity, and equitable opportunities for its citizens.
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