According to the recently released Annual Economic Review report by the Finance Ministry, the trajectories of consumption and investment have surpassed the pre-pandemic levels, signalling a recovery from the pandemic.
The Finance Ministry published the Annual Economic Review report for May 2023 on Thursday. The report states that India's GDP for FY 23 experienced a significant boost, reaching 7.2%, primarily driven by a robust performance in the final quarter. This growth rate exceeds the previous estimate of 7% projected in February.
The report highlights that following the pandemic, the quarterly patterns of consumption and investment have surpassed the levels seen prior to the pandemic.
According to the report released by the Finance Ministry, domestic demand has shown a remarkable recovery and has consistently strengthened throughout FY23. This recovery has resulted in a convergence of the pre-pandemic and post-pandemic growth trajectories on a quarterly basis.
The report also mentions that external demand did not contribute significantly to the economy in the latter half of FY23.
"The convergence of real GDP trajectories, both pre- and post-pandemic, will occur when external demand begins to play a role. The supply side of the economy effectively met the demands in FY23," the report stated.
In the last quarter, the agriculture sector achieved its highest growth rate in twelve quarters. The industrial sector experienced a rebound in Q4, primarily due to growth in the manufacturing segment. By the end of the year, the contact-intensive services sector fully recovered to its pre-pandemic level in terms of both scale and depth.
According to the report, the increased employment levels played a significant role in strengthening domestic demand.
Despite the pandemic, the labour force participation rate (LFPR) in India followed the pre-pandemic trend and continued to rise. Furthermore, the overall unemployment rate declined to a five-year low of 4.1% in FY22, which was accompanied by an increase in the worker-population ratio.
In FY23, there was a consistent decline in the urban unemployment rate across all quarters, indicating a stable rise in employment opportunities within the country.
The report stated that the growth in employment levels can be attributed, in part, to various policy measures implemented over the past few years. These measures focused on strengthening the corporate sector, supporting small enterprises, enhancing the ease of doing business, and attracting foreign investment, all of which contributed to the economy's capacity to generate employment.
Additionally, the report highlighted the positive impact of increased repo rates in India. It mentioned that by the end of FY23, there was a notable transmission of approximately 40-45% in lending and deposit rates, indicating the effectiveness of this policy measure.
