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“Stellar macroeconomic management in the midst of unprecedented global challenges has put India on a quicker recovery path than has been the case in other nations,” the Finance Ministry said in a report on July 6.

“Investments in supply-side infrastructure have raised the possibility of India enjoying sustained economic growth longer than it has been able to do in several decades,” Monthly Economic Review for May and Annual Review of 2023 said.

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“India appears poised to sustain its growth in a more durable way than before,” the report said, “nonetheless, it is no time to rest on the laurels nor risk diluting the painstakingly and consciously achieved economic stability. If we are patient, the rising tide will lift all boats as it has begun to.”

The report said that despite unprecedented global challenges in the last few years coming on top of balance sheet troubles in Indian banking and non-financial corporate sectors, “macroeconomic management has been stellar. It contributed significantly to enhancing India’s macroeconomic stability and set India on a quicker recovery path than has been the case in other nations.”

Observing that a critical cog in the wheel of economic growth in FY23 was the disciplined fiscal stance of the Central government, the report said, the year ended with a lower fiscal deficit (as per cent of GDP) compared to the previous year.

“Yet, the government could cut duties and increase welfare spending to alleviate stress from inflation,” it said, adding, the government could also maintain its enhanced provision for capital expenditure, which is now leading to the crowding-in of private investment.

The report highlighted that the Indian economy has carried the momentum from FY23 into the current fiscal year and high frequency indicators paint a healthy picture of the state of the economy.

Urban demand conditions remain resilient, with higher growth in auto sales, fuel consumption and UPI transactions, it said, adding, rural demand is also on its path to recovery, with robust growth in two- and three-wheelers sales.

“Goods and Services tax collection, Purchasing Managers’ Index (PMI) for the manufacturing and services sector continues to expand,” it said.

On the global front, it said, the uptick in economic activity during the first quarter of 2023 has also continued in the second quarter, as evident in the expansion of the global Composite PMI.

“However, factors that can constrain the pace of growth include escalation of geopolitical stress, enhanced volatility in global financial systems, sharp price correction in global stock markets, a high magnitude of El-Nino impact and modest trade activity and FDI inflows owing to frail global demand.

“Should these developments deepen and dampen growth in the subsequent quarters, the external sector may challenge India’s growth outlook for FY24,” it said.

Talking about the more-than-expected GDP estimate for 2022-23, the report said a strong final quarter performance pushed the GDP growth for the full year to 7.2%, higher than the 7% estimated in February.

“The country’s impressive growth experience in FY23, when the world economy was rocked by inflation and restrained by monetary tightening, is a narrative on what works or does not work for the Indian economy,” it said, adding, what clearly works for India’s economy is the strength of its domestic demand.

“The pandemic had struck at its roots to cause an unprecedented contraction of output in FY21, but domestic demand has recovered since then and moved from strength to strength in FY23,” it said.