ICRA Predicts GDP May Bounce Back to over 10 % in FY 22

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After a 7.8 per cent pandemic-driven contraction in the ongoing fiscal year, India’s real GDP is projected to record an expansion of 10.1 per cent in FY2022, according to investment information agency ICRA.

The growth will be led by continued normalisation in economic activities as rollout of Covid-19 vaccines gathers traction as well as low base.

“We expect a multi-speed recovery in FY2022 with the contact-intensive sectors, discretionary consumption and investment by private sector lagging the rest of economy,” said ICRA.

On an absolute basis, the value of Indian GDP in real terms in FY2022 is projected to be only mildly higher than the level recorded in FY2020. Nominal GDP is expected to expand by 14 per cent in FY2022, the highest in current series.

ICRA said headline CPI inflation is expected to decline to 4.6 per cent in FY2022 while exceeding the Reserve Bank of India’s (RBI’s) medium-term target of 4 per cent for the third consecutive year.

The stance of monetary policy is likely to be changed to neutral from accommodative in August review or later after there is greater certainty on the durability of the awaited economic revival.

Simultaneously, the RBI may initiate steps in a calibrated manner to reduce the magnitude of systemic liquidity surplus.

ICRA said normalisation in economic activity should support a healthy rise in tax collections in the coming fiscal.

While the pandemic is likely to constrain disinvestment proceeds in FY2021, the pipeline for FY2022 is healthy. However, non-tax revenues like the inflows of government from the telecom sector and the surplus to be transferred by the RBI will be muted in FY2022.

A fiscal deficit of 5 per cent of GDP will allow enough space for prioritising health expenditure, Covid-19 vaccine rollout as well as capital spending, said ICRA.

The fiscal deficit target could either be set as a point estimate or articulated as a relatively narrow range around the mid-point of 5 per cent of GDP.

SMEStreet Edit Desk

SMEStreet Edit Desk is a small group of excited and motivated journalists and editors who are committed to building MSME ecosystem through valuable information and knowledge spread.

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