Centre, states' fiscal balances improved progressively

The fiscal balances of the central and state governments taken together have improved progressively despite expansionary public investments, according to the Economic Survey 2023-24.

Tax compliance gains driven by procedural reforms, expenditure restraint, and increasing digitisation helped India achieve this fine balance, according to the Economic Survey 2023-24.

The external balance has been pressured by subdued global demand for goods, but strong services exports largely counterbalanced this, it added.

Noting that global output is now somewhat more resilient than in 2022, the pre-Budget document said inflationary pressures are shrinking, and trade is set to recover, should there be no further geo-political shocks or flare-ups.

However, the survey noted that chances of geopolitical disturbances and conflicts have only gone up in recent times.

The survey said India's calibrated response to the pandemic on the economic front included three salient components.

“The first has been the focus on public spending on infrastructure, which kept the economy afloat by creating a strong demand for jobs and industrial output and triggered a lagged yet vigorous private investment response.

“Stronger balance sheets of the financial and non-financial private sector helped, aided by a decade of supporting initiatives by the government and the Reserve Bank of India,” it said.

The net impact of these developments has been that the Indian economy recovered and expanded in an orderly fashion in the last three years, the survey added.

The survey said the real GDP in FY24 was 20 per cent higher than its FY20 level, a feat that only a very few major economies achieved, while also leaving a strong possibility for robust growth in FY25 and beyond.

“Growth has been inclusive with a reduction in unemployment and multi-dimensional poverty and an increase in labour force participation,” it said, adding that overall, the Indian economy looks forward to FY25 optimistically, anticipating broad-based and inclusive growth.

For India, the survey said FY23 began with multiple challenges as spillovers from the conflict in Europe were stoking domestic price pressures and widening the current account deficit (CAD) through increased oil prices.

Central banks in several countries began raising policy rates to battle inflationary pressures, it said.

However, the survey said, throughout FY23 and FY24, the focus on macroeconomic stability was vital in securing economic growth amidst domestic and external vulnerabilities.