India’s real GDP growth pegged at 9% each in FY22, FY23 by ICRA

Maintaining its forecast of a 9 per cent gross domestic product (GDP) expansion in fiscal 2021-22 (FY22), with a clear K-shaped divergence amongst the formal and informal parts of the economy and the large gaining at the cost of the small, domestic rating agency ICRA expects India’s economy to maintain 9 per cent growth in fiscal 2022-23 as well.

However, the expansion in FY23 is expected to be more meaningful and tangible than the base effect-led rise in FY22, it said.

The data for October-November this year does not point to a broad-basing of the recovery.

Maintaining its forecast of a 9 per cent gross domestic product (GDP) expansion in fiscal 2021-22 (FY22), with a clear K-shaped divergence amongst the formal and informal parts of the economy and the large gaining at the cost of the small, domestic rating agency ICRA expects India’s economy to maintain 9 per cent growth in fiscal 2022-23 as well.

“While we are cautiously optimistic that the economic recovery in India will gain durability in the coming year, we are watchful of the evolving impact of the Omicron variant. The RBI’s [Reserve Bank of India] latest survey of consumer confidence in urban areas points to a modest pick-up in confidence,” it said in a research report.

Evidence of a rise in demand is offered by the jump in merchandise imports in the recent months.  In  ICRA’s view,  rising  consumption  will  push  capacity  utilisation  above  the  crucial threshold of 75 per cent by the end of 2022, which should then trigger a broad-based pick-up in private sector investment activity in 2023.

ICRA also  expects the  visibility  of  tax  revenue  growth  to  embolden  faster  government spending in 2022. While the provision of GST compensation to the state governments was originally  planned  to  cease  at  the  end  of  June  2022,  substantial  funds  would  be transferred  on  a  cash  flow  basis  during  2022,  which  would  offer  the  states  a  softer landing. This would bolster state spending, a key engine of growth and confidence in the economy.

Based  on  ICRA’s assumptions  of  the  GDP  growth  if  the  COVID-19  pandemic  had  not emerged versus the actual shrinkage that occurred in FY21 and the expected recovery in the next two years,  the  net loss to the Indian economy from the pandemic during FY2021-23 is estimated at ₹39.3 trillion in real terms.

Fibre2Fashion News Desk (DS)