The Economic Survey is not just the government’s economic report card, but is also an important document for comprehending its growth outlook, commitment towards fiscal consolidation and the medium-term economic vision.SURVEY IS OPTIMISTIC ON GROWTH…With respect to growth, the survey appears optimistic on both the near- and medium-term outlook. In FY24, its baseline expectation is real GDP growth will rise 6.5% YoY versus 7% in FY23, suggesting that despite a global slowdown, it expects domestic demand to remain resilient, backed by strength in private consumption and a pickup in private investment. Importantly, it believes India’s potential growth will accelerate in the coming years from around 6% currently to 6.5-7% on the back of the ongoing reforms, and hard and digital infrastructure investments. With corporate and financial sector balance sheets much stronger today, it believes India stands ready for a faster economic take-off.Amid its growth optimism, the survey bats for continued fiscal consolidation, suggesting the commitment to narrow the fiscal deficit to 4.5% of GDP by FY26 remains intact. Its medium-term vision advocates continuity in the direction of supply-side reforms. This includes augmenting infrastructure investments financed via asset monetisation, a continued push on the production-linked incentive scheme to boost manufacturing and India’s exports potential, ensuring there is a more vibrant MSME sector, a keen focus on social welfare, investing in education and skilling, and remaining focused on the longer-term goals of climate change and energy transition. …BUT WE ARE MORE CAUTIOUS IN THE NEAR TERMWe believe the survey’s growth assessment for FY24 is too optimistic. Our view is India’s cyclical growth has peaked and is likely to slow more sharply than expected to 5.1% YoY in FY24 for three reasons. First, we expect a recession across both the US and Europe, which will weaken India’s exports further. China’s reopening is a positive, but India’s direct growth exposure to China is quite limited. Second, we find that periods of weak exports lead to a slowdown in fixed investments, due to demand uncertainty. Hence, expectations that the private capex cycle will pick up are likely to lead to disappointment. Finally, monetary policy works with long lags, and the impact of the domestic policy tightening on interest-rate-sensitive sectors of the economy is yet to be fully seen.If real growth disappoints, as we expect, then the ability to walk the path of fiscal consolidation will also be more challenging in FY24. We see nominal GDP growth slowing to 8.5-9% YoY from 15.4% in FY23, due to lower real growth and also the GDP deflator, which means tax revenues may disappoint next year and there will be pressure to announce countercyclical spending later in the year.That said, we agree with the medium-term vision set out in the survey. Over the last decade (2011-20), India did face a triple balance sheet crisis, first led by corporates (high leveraging) and banks (high non-performing assets) and, after 2018, led by shadow banks (bad loans), resulting in a decade of slowing investment and financial stability risks.Today, balance sheets are in a much better shape. India’s medium-term growth prospects should also be supported by the ongoing reforms, young population, strong fundamentals, prudent policymaking and the trend of supply chains diversifying away from China.Currently, China is attracting a lot of investor attention due to its faster reopening, but we do expect investors to focus back on India in the latter part of FY24, as they look forward to India’s better growth prospects in FY25 and beyond. Until then, we believe traversing the growth and fiscal landscape might be more challenging than the survey currently anticipates.