India’s economy to grow by 9.2% in 2021-22, says annual survey

India’s economy to grow by 9.2% in 2021-22, says annual survey

India’s GDP to set grow by 9.2% this year and 8% to 8.5% in 2022-23, although rising inflation and energy prices could threaten this growth, according to a new Government survey.

The Economic Survey for 2021-22 said: “Growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending.

“The year ahead is also well poised for a pick-up in private sector investment with the financial system in a good position to provide support to the revival of the economy.”

The GDP growth projection for the coming year is based on the assumption that “there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of $70-$75 per barrel, and global supply chain disruptions will steadily ease over the course of the year”, the survey said.

However, the survey highlights the risks posed by possible new variants of coronavirus and spiralling inflation across the world, both of which could hamper growth.

It added that some sections of the economy, including travel and hospitality, were yet to fully recover. “The stop-start nature of repeated pandemic waves makes it especially difficult for these sectors to gather momentum,” it said.

“Latest advance estimates suggest full recovery of all components on the demand side in 2021-22 except for private consumption. When compared to pre-pandemic levels, recovery is most significant in exports followed by government consumption and gross fixed capital formation,” it noted.

When it comes to the threat of rising prices, the report noted: “Inflation has reappeared as a global issue in both advanced and emerging economies… India does need to be wary of imported inflation, especially from elevated global energy prices,” although it also suggested that the double-digit wholesale price inflation in recent months would even out.

 

Interest rates unchanged

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has voted unanimously to keep the headline rate of interest rate unchanged at 4%.

RBI governor Shaktikanta Das said in a statement: “The MPC flagged the potential downside risks to economic activity from the highly contagious Omicron variant. Reassuringly, the symptoms have remained relatively mild and the pace of infections is moderating as quickly as it surged.

“There is, however, some loss of momentum in economic activity as reflected in high-frequency indicators such as purchasing managers’ indices for both manufacturing and services,” he said.