Higher infrastructure spending to boost core sector growth

Mood Toody's Investors Service has recently raised India's Leconomic growth estimate for 2023 to 5.5% from 4.8% projected earlier.

- Tushar K Mahanti

The upward revisions were influenced by the sharp increase in capital expenditure in the last budget to ₹10 trillion accounting for about 3.3% of GDP for fiscal year 2023-24 - up from ₹7.5 trillion for 2022-23.

The RBI, however, appears more optimistic and argues that if effectively implemented, the record rise in capital expenditure can take India's real GDP growth close to 7% in 2023-24. The Economic Survey 2022-23 earlier projected a baseline GDP growth of 6.5% in real terms in the next financial year. The projection was broadly comparable to the estimates provided by multilateral agencies such as the World Bank, the IMF, ADB and other rating agencies.

The finance ministry's report released last month projected India's GDP to grow at 7% in 2022-23 despite global headwinds. The monthly economic review by the ministry reportedly said that, "Supported by the gains from high services exports, the moderation in oil prices, and the recent fall in import-intensive consumption demand, India's current account deficit is estimated to fall in FY23 and FY24, providing a buffer to the rupee in uncertain times."

The sharp rise in net service exports in 2022-23 over the previous year is a critical development as India increases its market share in both IT and non-IT services, whose demand has been triggered by the pandemic, the report said, adding that imports are also less costly now with the easing of global commodity prices.

Sharp rise in capex to boost core sector growth