ICRA Further Revised FY22 GDP Forecast to 9%

Ratings agency ICRA revised its real GDP growth forecast for India in FY2022 to 9 per cent from 8.5 per cent.

The agency credited the upward revision in the GDP to the brightening prospects for H2FY22 which is expected to benefit from the rapid ramp-up in Covid-19 vaccine administration, healthy advance estimates of kharif output and easing of cash management measures related to the Central government's spending.

ICRA Chief Economist Aditi Nayar said, "The widening coverage of Covid-19 vaccines is likely to boost confidence, which will, in turn, re-energise demand for contact-intensive services, helping to revive the portions of the economy affected most by the pandemic."

Besides, the agency estimated that nearly three-fourths of Indian adults could receive their second Covid-19 vaccine shot by the end of 2021, if the average of 7.9 million doses per day recorded during September 1-26, 2021 can be sustained.

Furthermore, the ICRA pointed out that robust kharif harvest is likely to sustain the consumption demand from the farm sector.

"Late sowing has helped to bring the kharif acreage nearly at par with last year's record area. In line with this, the 'First Advance Estimates' of crop production for FY2022 signalled a robust rise in kharif output, barring coarse cereals and oilseeds, quelling the concerns raised by the uneven monsoon and episodes of flooding."

"Based on this, we have enhanced our forecast for the GVA growth in agriculture, forestry and fishing to 3 per cent each in Q2 FY2022 and Q3 FY2022, from our earlier projection of a tepid 2 per cent rise."

In addition, Nayar said the robust upturn in the direct tax revenues and the awaited commencement of inflows from the 'National Monetisation Pipeline' have improved the revenue visibility for the Central government.

"This is likely to have contributed to the withdrawal of the extant cash management guidelines, which should set the stage for accelerated 'Central Government' spending in H2 FY2022."

"Visible traction in government spending will help unleash the animal spirits and drive a faster recovery in economic activity."

However, the agency cautioned that trends from the industrial sector remain lacklustre in September 2021, with semi-conductor non-availability weighing upon auto production and a flattening out of GST e-way bills.

Additionally, heavy rains have dampened electricity demand and are likely to distort trends in mining and construction.