The data released by the National Statistical Office on Tuesday suggests that the economy may have recovered from the damage caused by the Covid-19 pandemic. However, certain sectors have not fully attained the level of pre-Covid productivity. Yet, after the contraction of 6.6 per cent in the previous financial year, the provisional estimates for 2020-21 growth at 8.7 percent are quite impressive. The full-year growth would have been still better were it not for the sharp drop in the January-March quarter due to the lingering effects of the Omicron phase of the pandemic. The situation was worsened further by the Russian invasion of Ukraine in late February and the resulting disruptions in global crude and commodities markets. With the Brent crude now ruling at $125 a barrel, and the food prices rising sharply, uncertainty looms over growth even in the current financial year. Of course, the provisional data is reassuring insofar as the economy has surpassed, albeit only marginally, the pre-Covid growth. But notably, given the low base of the two-year pandemic-marred growth, the actual GDP rise in the last financial year is a paltry 1.5 per cent. As per the RBI, for the economy to return to the pre-Covid trajectory will require a growth rate of 7.5 per cent every year until 2034-35. In other words, it is not easy to fully compensate for the huge blow caused by the Corona pandemic. Due to the undiminished pressures on the general price-line, and a tightening monetary policy to contain inflation, demand-side problems are likely to persist in the near future. Besides, the global situation continues to be dicey thanks to the Russian aggression against Ukraine. India being the fastest-growing major economy can actually be poor consolation for the aam aadmi if the food and fuel prices continue to pressure the general price-line.
Retail inflation was now ruling at eight per cent, with the RBI expected to further tighten the monetary policy in its sitting later this month. Happily belying fears of unmanageable levels of government borrowing to finance the heightened programme of subsidies, including the distribution of free rations to nine crore families and a much higher outgo on subsidy for fertiliser, the NSO provisional data showed that the fiscal deficit was contained at 6.7 per cent of GDP against the earlier target of 6.9 per cent for 2021-22. As for the prognosis for the current financial year, a major factor would be the monsoon. The Met Office has predicted a normal rainfall. This should bring cheer to the farmer. The government needs to incentivise the farm sector by pre-declaring attractive minimum support prices for all major Kharif crops. And the scare over fertiliser supplies at reasonable prices ought to be quashed. The outlook for the economy, provided there are no more global shocks, remains positive. Above all, the higher tax collections in recent months testify to the return of normalcy, though private consumption is still sluggish.
