India becomes world’s fastest-growing major economy in 2023: United Nations Report

The United Nations in its latest report ‘the Economic and Social Survey of Asia and the Pacific 2024’ has said that India has become the world’s fastest-growing major economy in 2023 amid strong household consumption and public investment in infrastructure. India registered an economic growth rate of 6.8 per cent in FY2023 supported by government spending on infrastructure and strong growth in manufacturing, mining and construction, which offset lower agricultural output. Formal unemployment was at a 12-year low of 4.1 per cent. Gross fixed capital formation increased by 9 per cent in the final quarter of FY23 to reach a share of 34 per cent of GDP, the highest since 2012-2013. 

It said elsewhere in the region, output growth in most economies moderated in 2023. Export-oriented countries faced weak external demand, especially from China and Europe. Average economic growth in the developing Asia-Pacific region picked up from 3.5 per cent in 2022 to 4.8 per cent in 2023. The rebound was concentrated in only a few large economies though, such as in China after it lifted COVID-19 pandemic restrictions and in the Russian Federation due to higher military-related investments.

It further said that climate change erodes productivity and fiscal revenues. South Asia is one of the regions most seriously affected, with India expected to lose about 5.8 per cent of daily working hours due to heat stress in 2030 (Kjellstrom and others, 2019). The problem is most severe for outdoor workers, particularly those employed in agriculture and construction, but also relevant for indoor factory workers. Globally, about 2.2 per cent of working hours are estimated to be lost due to rising temperatures.

Agricultural subsidies play a notable role in the region and are strongly related to climate change. In India, farm subsidies reached 2 per cent of GDP in 2019 and constituted about one fifth of aggregate farm income (Ramaswami, 2019), while also helping to raise agricultural productivity (Badiani, Jessoe and Plant, 2012). An additional 1.2 per cent of GDP was spent on government food subsidies in fiscal year 2021/22 (India, MCAFPD, 2023; India, MSPI, 2023) as part of policies aimed at reducing rural poverty.

On India’s goods and services tax reform, it said the goods and services tax (GST) reform in 2017 consolidated multiple layers of goods and services taxes into a single VAT-style regime, representing a significant transformation in India’s indirect tax system. With a linear tax mix, a simplified rate structure and the built-in advantages of VAT in enforcing compliance, the reform enhanced tax administration and economic efficiency gains as it reduced past distortions and tax-induced domestic market fragmentation. Since the reform, the number of registered GST taxpayers has more than doubled. GST revenues also increased notably to more than 3.1 per cent of GDP in fiscal year 2023.