Overview of Economic Survey for 2022-23 | Summary & Highlights

Table of Contents

1. Economy

2. Stock Market

3. Direct Tax

4. Indirect Taxes

5. Corporate and other Laws

6. Aadhaar

7. IFSC – GIFT City

Economic Survey is an annual report published by the Government of India to present an overview of the Indian economy. It includes an analysis of the economic performance, key trends, outlook for the current financial year, and initiatives and reforms. The Economic Survey is prepared by the Economic Division of the Department of Economic Affairs under the guidance of the Chief Economic Advisor. After approval by the Finance Minister, it is presented in the Parliament.

The Economic Survey for the year 2022-23 has been tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha on 31-01-2023.

The survey highlighted that at least three shocks had hit the global economy since 2020: the Covid Pandemic, the Russian-Ukraine conflict, and the worldwide surge in inflation. In response, central banks, led by the Federal Reserve, implemented synchronised policy rate hikes. The rate hike by the Fed led to the appreciation of the US dollar and the widening of Current Account Deficits in net importing economies. Despite the global growth projections declining in 2023, the Indian economy has fully recovered and is expected to continue its growth momentum.

The key discussions relating to the Economy, Direct Tax, Indirect Tax, Banking, Primary Capital Markets, and IBC Laws highlighted in the Economic Survey are as under:

1. Economy

(a) The rate hike by the US Fed drove capital into the US markets causing the US Dollar to appreciate against most currencies. This led to the widening of the Current Account Deficits (CAD) and increased inflationary pressures in net importing economies.

(b) The widening of the CAD may also continue as global commodity prices remain elevated and the growth momentum of the Indian economy remains strong. The loss of export stimulus is further possible as the slowing world growth and trade shrinks the global market size in the second half of the current year.

(c) Global growth has been projected to decline in 2023 and is expected to remain generally subdued in the following years as well. The slowing demand will likely push down global commodity prices and improve India’s CAD in FY24.

(d) The Indian economy, however, appears to have moved on after its encounter with the pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to ascend to the pre-pandemic growth path in FY23. Yet in the current year, India has also faced the challenge of reining inflation.

(e) The Capital Expenditure (Capex) of the central government, which increased by 63.4% in the first eight months of FY23, was another growth driver of the Indian economy in the current year. The Centre’s Capex has increased from a long-term average of 1.7% of GDP (FY09 to FY20) to 2.5% of GDP in FY22 PA.

(f) RBI has projected headline inflation at 6.8% in FY23, which is outside its target range. It is not high enough to deter private consumption and not so low to weaken the inducement to invest.

(g) The survey projects a baseline GDP growth of 6% to 6.8% in real terms in FY24.

(h) Support for economic growth will come from the expansion of public digital platforms and path-breaking measures such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes to boost manufacturing output.

(i) With the vision of $1 trillion digital economy by 2025, the government is marching towards providing more and more e-governance based services.

(j) Logistics costs in India have been in the range of 14-18 per cent of GDP against the global benchmark of 8 per cent. The targets for achieving the vision of the National Logistics Policy by 2030 are to reduce the cost of logistics in India to be comparable to global benchmarks, improve the Logistics Performance Index ranking to be among the top 25 countries, and create a data-driven decision support mechanism for an efficient logistics ecosystem.

2. Stock Market

(a) Mutual Funds witnessed lower net inflows, yet MF Industry’s AuM grew by 8.1% at the end of November 2022 YoY basis.

(b) FPIs recorded a net outflow of US$ 2.5 billion during April-December 2022 against an outflow of US$ 0.6 billion a year ago.

(c) The number of firms opting to list on the stock exchange increased by 37%. The number of SMEs coming with IPOs almost doubled, and the total funds raised by them are almost three times the funds raised in the same period last year.

(d) In April-December 2022, global stock markets declined because of geo-political uncertainty. On the contrary, the Indian stock market saw a resilient performance, as Nifty 50 registered a return of 3.7% during the same period.

(e) This year witnessed the largest IPO ever in the history of India. The LIC’s IPO was the largest IPO ever in India and the sixth biggest IPO globally in 2022.

3. Direct Tax

(a) By eliminating 25,000 redundant regulations, abolishing 1,400 outdated laws, abolishing the angel tax, and ending retrospective taxation on offshore indirect transfers of assets in India, the government demonstrates its commitment to a non-hostile policy environment, improving investor confidence and enhancing growth prospects.

(b) As the pandemic-related uncertainties and disruptions ease, the effects of tax reforms, such as the corporate tax cut, are becoming more evident in higher tax collections. The YoY growth in corporate tax collections for April to November 2022 was 21.1%, compared to an average YoY growth of 10.3% for the same period from FY13 to FY19.

(c) The increased revenue buoyancy has been achieved due to the implementation of technology-driven tax governance reforms aimed at simplifying tax procedures, increasing compliance, and enhancing fraud detection.

4. Indirect Taxes

(a) GST has become a crucial revenue source for both Central and State governments. The gross GST collections from April to December 2022 reached Rs. 13.4 lakh crores, rising 24.8% YoY with an average collection of Rs. 1.5 lakh crore per month.

(b) GST registration numbers increased from 70 lakhs in 2017 to over 140 lakhs in 2022.

(c) GST has boosted government revenues and improved income reporting with positive impacts on income tax collection and overall economic activity.

(d) GST collections have grown at a CAGR of 10.9%, demonstrating a GST collection buoyancy of around 1.1. This growth happened despite the decline in the effective GST rate from 14.4% in 2017 to 11.6% in 2019.

(e) To meet the shortfall in GST compensation for States, the government borrowed Rs. 2.69 lakh crore in FY21 and FY22 and passed it on to states as compensation in addition to regular payments from the fund.

(f) High imports in the current year have resulted in a 12.4% YoY increase in customs collection from April to November 2022, surpassing the average growth for the same period from FY13 to FY19.

(g) India is currently negotiating new FTAs and reviewing existing FTAs with several trading partners.

5. Corporate and other Laws

(a) At the end-November 2022, India was the world’s sixth-largest foreign exchange reserves holder.

(b) India has the largest emigrant population and is the top remittance recipient country, with remittances anticipated to reach a milestone of US $100 billion in 2022.

(c) With the highest FinTech adoption rate of 87% among the public compared to the global average of 64%, India has gained 3rd place in digital payments only after US and China, signifying that India has an untapped market.

(d) After decriminalising minor economic offences under the Companies Act 2013, more than 1,400 default cases have been decided without resorting to the court.

(e) More than 4,00,000 companies have willingly rectified past defaults to avoid penalties under the Companies Act.

(f) The RERA contributed towards the speedy redressal of disputes and enabled a single window clearance for timely approvals to the developers. The RERA Authorities have disposed of more than 1.06 lakh complaints. With 99,262 projects and 71,514 agents already registered under RERA, the Act incentivises more investments into the sector.

(g) The trading volume in G-Secs (including T-Bills and SDLs) reached a two-year high of Rs. 27.7 lakh crore during Q2 FY23, registering a YoY growth of 6.3%. The higher trading volume reflects the growing interest of market players/ traders in the government security market.

(h) Green bonds have become widely accepted to raise funds to support climate and environmental projects and command a relatively lower cost of capital vis-à-vis regular bonds. As per SEBI, from 2017 to September 2022, 15 Indian corporates issued green bonds of Rs 4,539 crores. The RBI has notified the calendar for issuing Sovereign Green Bonds (SGrBs) of Rs 16,000 crores for the fiscal year 2022-23.

(i) To make India an energy-independent nation and to de-carbonise critical sectors, the government approved the National Green Hydrogen Mission on 4^th January 2023, with an initial outlay of Rs 19,744 crore. The Mission will facilitate demand creation, production, utilisation, and export of Green Hydrogen and mobilisation of over Rs 8 lakh crore of investment by 2030.

(j) Until 30^th September 2022, 23,417 applications for initiating the corporate insolvency resolution process (CIRP) of corporate debtors having underlying defaults of Rs. 7.3 lakh crore were disposed of before their admission into CIRP.

(k) In FY 22, the total amount recovered by the Scheduled Commercial Banks (SCBs) through IBC has been the highest compared to other channels such as Lok Adalat’s, SARFAESI Act and DRTs in this period.

(l) The asset quality of Scheduled Commercial Banks SCBs has been improving steadily over the years across all major sectors. The Gross NPA ratio has decreased from 8.2% in March 2020 to a seven-year low of 5% in September 2022, while Net NPA has dropped to a ten-year low of 1.3% of total assets.

(m) The continuous improvement in asset quality is seen in the declining GNPA ratio of NBFCs from the peak of 7.2% recorded during the second wave of the pandemic (June 2021) to 5.9% in September 2022, reaching close to the pre-pandemic level. With the decline in GNPAs, the capital position of NBFCs also remains robust, with a CRAR of 27.4% in end-September 2022, slightly lower than 27.6% in March 2022.

(n) Credit extended by NBFCs is gaining momentum, with the aggregate outstanding amount at Rs. 31.5 lakh crore as of September 2022. NBFCs continued to deploy the largest quantum of credit from their balance sheets to the industrial sector, followed by retail, services, and agriculture. Loans to the services sector (share in outstanding credit being 14.7%) and personal loans (share of 29.5%) registered a robust double-digit growth.

6. Aadhaar

Some of the interesting stats as laid out in the survey relating to Aadhar are as under:

(a) Aadhaar generated: 135.2 crore

(b) Aadhaar updated: 71.1 crore

(c) Authentication done: 8621.2 crore

(d) eKYC done: 1350.2 crore

(e) 75.3 crore residents have linked their Aadhaar with ration cards

(f) 27.9 crore residents linked Aadhaar for LPG subsidy

(g) 75.4 crore bank accounts are linked with Aadhaar

Dive Deeper:
Aadhar Card (आधार कार्ड) – Get Aadhaar Card Complete Information Online

7. IFSC – GIFT City

(a) On a global scale, International Financial Centres (IFCs) have gained significance in the financial services industry as they have significantly impacted the growth of cross-border financial transactions.

(b) For the past 24 months, IFSC has experienced significant expansion and popularity in all areas.

(c) IFSC GIFT boasts over 390 entities registered across various financial services, including banks, capital markets, insurance companies, fintech firms, aircraft leasing organisations, and bullion exchanges.

(d) The Union Cabinet has approved the signing of 2 Multilateral MoUs and 7 Bilateral MoUs by IFSCA to deepen cooperation with foreign regulators and aid the mutual exchange of information for developing financial products and services in GIFT-IFSC.