India’s economy set to grow by 6.3% in current financial year

Economic growth in India is expected to hit 6.3% during 2023-24, thanks to the strength of the country’s financial sector and increasing private investment, according to new research from a leading industry body.

Ficci’s latest ‘Economic Outlook Survey’ predicts annual GDP growth for 2023-24 at 6.3%, forecasting a minimum growth rate of 6% and a maximum of 6.6%.

It said while the growth forecast for agriculture and allied activities has been put at just 2.7% for 2023-24, the industrial and services sector are predicted to grow 5.6% and 7.3% respectively in current fiscal year.

Ficci – the Federation of Indian Chambers of Commerce & Industry – said there were dangers to the Indian economy. Its report said: “Persisting headwinds on account of geopolitical stress, slowing growth in China, lagged impact of monetary tightening and below normal monsoons pose downside risks to growth.”

When it comes to inflation, the organisation said the median forecast for consumer price index (CPI) inflation has been put at 5.5% for 2023-24, with a minimum and maximum range of 5.3% and 5.7% respectively.

“There was a unanimous view among the participants that global growth is poised to slow in the current year vis-a-vis 2022, and this trend is expected to continue in the year 2024 as well,” Ficci said.

The survey added that although India’s economic performance has remained relatively steady amid recent challenges, “the country has not been unscathed from the external shocks”.

It said: “Weak external demand is already reflecting in India’s merchandise exports performance and is expected to be a drag on domestic growth.

“Nonetheless, growth in India is expected to hold ground on the back of good health of the financial sector, robust urban demand, uptick in private investment as a result of government’s front-loading of capex, pick up in the real estate/construction sector and the forthcoming festive season,” the survey said.

The survey of leading economists representing industry, banking and financial services sector was conducted in September 2023.

Indian taxpayers to switch to new tax regime

About 70% of personal income taxpayers are expected to migrate to the new tax regime, according to Nitin Gupta, chairman of the Central Board of Direct Taxes (CBDT).

He said direct tax collections stood at ₹9.57 trillion (£94bn) after refunds in the current financial year (as of 9 October). This was 21.8% higher than the net collections made in the same period a year ago.

Prior to refunds, the tax authority collected ₹11.07 trillion so far this year, nearly 18% more than the figure for the same period in 2022. Factors including the use of technology and the sharing of information about taxpayers’ transactions reported by various entities are helping in tax collection growth, Gupta said.

Around 5.3 million new taxpayers had filed a tax return by July this year, and around 60% of corporate income is now collected via the low tax rate regime.

Gupta said that between 60%–70% of individual taxpayers are expected to migrate to the new personal income tax regime, which is a beneficial provision. The taxpayer can choose between the old and the new regime at the time of filing the returns, said Gupta, adding that corporations using the new regime introduced in 2019 were benefiting from lower tax rates and tax exemptions.

“The last data I had was that there was shift to the extent of 60% of (corporate) profits to the new tax regime in FY23. That is reflected in our corporate tax collection,” he said.

The CBDT chairman also said India is also working with G20 nations for automatic exchange of data on undisclosed overseas real estate assets. He said investigations were ongoing in many cases of undisclosed overseas assets.

In the current assessment year ending in March 2024, 72.7 million income tax returns have already been filed, according to CBDT figures.