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India Ratings and Research (Ind-Ra) estimates India’s gross domestic product (GDP) growth to bounce back to 10.4 per cent year on year (YoY) in fiscal 2021-22, primarily driven by the base effect. The estimate also shows that after recording negative growth during the first nine months of 2020-21, GDP growth will finally turn positive at 0.3 per cent YoY in the fourth quarter of the fiscal.
Although the recovery in 2021-22 on a YoY will be V-shaped, the size of the GDP will barely surpass the level attained in fiscal 2019-20 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 and herd immunity becomes a reality, the rating agency said in a press release.
Setting aside its fiscal conservatism in the latest budget, the government decided to provide the much-needed support to the demand side of the economy, which had been missing in the Atmanirbhar package announced earlier, it noted.
As a result, Ind-Ra expects the government final consumption expenditure to grow 10.1 per cent YoY in 2021-22. Although the private final consumption expenditure was witnessing a slowdown even before the imposition of COVID-19 induced lockdown, it is expected to grow by 11.2 per cent in 2021-22 fiscal, led by essentials (pharma, healthcare and telecom), followed by non-discretionary consumer goods, infrastructure (chemicals, oil and gas, information technology, sugar and agri-commodities), industrial goods and cyclical sectors (power, iron and steel, logistics, cement, construction, automobiles and automobile ancillaries).
Yet, Ind-Ra’s estimates shows that the private final consumption expenditure in 2021-22 will be 14.2 per cent less than the trend level. The rating agency expects investments as measured by gross fixed capital formation to grow at 9.4 per cent YoY in 2021-22, ably supported by government capital expenditure (capex), which is budgeted to grow at 26.2 per cent YoY in the fiscal.
Despite this renewed focus by government on capex, the size of gross fixed capital formation in 2021-22 will still be 26.3 per cent lower than the trend level.
Ind-Ra projects the agricultural gross value added to grow 3 per cent YoY in 2021-22. This is based on the expectation of a normal and spatially well-distributed rainfall in 2021.
Fibre2Fashion News Desk (DS)
India Ratings and Research estimates India's GDP growth to bounce back to 10.4 per cent year on year (YoY) in fiscal 2021-22, primarily driven by the base effect. The estimate also shows that after recording negative growth during the first nine months of 2020-21, GDP growth will finally turn positive at 0.3 per cent YoY in the fourth quarter of the fiscal.