Indian economy likely to grow 7-7.5% in FY23, says EAC-PM

The council said contact intensive sectors and construction should recover in 2022-23

The Indian economy is likely to grow by 7 - 7.5 per cent in the next fiscal year, the Economic Advisory Council to the Prime Minister (EAC-PM) said on Thursday, while observing that contact intensive sectors and construction should recover in 2022-23.

In a statement, the EAC-PM however added that this should not mean that the Union Budget for 2022-23 should project unrealistically high tax revenue or tax buoyancy numbers.

"Looking beyond the current year, 2021-22, EAC-PM members were optimistic about real and nominal growth prospects in 2022-23. Other than an element of the base effect, the contact intensive sectors and construction should recover in 2022-23," it said.

The Reserve Bank of India (RBI) has lowered the growth projection for the current financial year to 9.5 per cent from 10.5 per cent estimated earlier, while the IMF has projected a growth of 9.5 per cent in 2021 and 8.5 per cent in the next year.

"Once capacity utilization improves, private investments should also recover. Therefore, Members felt a real rate of growth of 7 to 7.5% in 2022-23 was likely," the statement said.

It noted that the Union Budget for 2021-22 was applauded because of reform measures, as well as transparency and realism in the numbers.

"EAC-PM members were of the view that these dimensions should be carried forward into the 2022-23 Budget too, signalling use of the extra revenue in the form of capital expenditure and human capital expenditure, since Covid has led to a human capital deficit," it added.

According to the statement, there should also be a clear roadmap for privatisation and the growth orientation of last year's Budget should also be maintained.

A meeting of the EAC-PM was held in Delhi on Thursday.