New Delhi: India’s gross domestic product (GDP) growth will bounce back to 10.4 per cent year-on-year (YoY) in FY22, primarily driven by the base effect, said India Ratings and Research (Ind-Ra).
Accordingly, the ratings agency’s estimates showed that after recording negative growth during 9MFY21, GDP growth will finally turn positive at 0.3 per cent YoY in 4QFY21.
“Although the recovery in FY22 on a YoY basis will be V-shaped, the size of the GDP will barely surpass the level attained in FY20 and will be 10.6 per cent lower than the trend value.”
“The impact of Covid-19 pandemic and lockdown on the economy, although subsiding, will continue to delay the normalisation of economic activities in the contact-intensive sectors till the mass vaccination or herd immunity becomes a reality.”
In the FY22 Union Budget, the Centre set aside its fiscal conservatism and decided to provide the much-needed support to the demand side of the economy, which had been missing in the ‘Atmanirbhar’ package announced earlier.
“As a result, Ind-Ra expects the government’s final consumption expenditure to grow 10.1 per cent YoY in FY22. Although the private final consumption expenditure was witnessing a slowdown even before the imposition of Covid-19 lockdown, it is expected to grow by 11.2 per cent in FY22, led by essentials, followed by non-discretionary consumer goods, infrastructure, industrial goods and cyclical sectors.”
“Yet, Ind-Ra’s estimates show that the private final consumption expenditure in FY22 will be 14.2 per cent less than the trend level.”
According to Ind-Ra estimates, investments as measured by gross fixed capital formation will grow at 9.4 per cent YoY in FY22, ably supported by government capex which is budgeted to grow at 26.2 per cent YoY in FY22.
