ICRA revises up India's fiscal 2022 GDP growth forecast to 9%
- IBEF
- September 28, 2021
ICRA, a ratings firm, raised its projection for India's real GDP growth in 2021-22 to 9% from earlier 8.5%.
The change was prompted by a ramp-up of COVID-19 immunisation, strong advance projections of the kharif (summer) crop, and quicker government expenditure, according to the agency.
It should be emphasised that following the 7.3% decline in 2020-21, there were hopes for a better growth rate in 2021-22.
Early in the fiscal year, however, the second wave of COVID-19 infections swept throughout the country, making analysts increasingly cautious. According to the RBI, the economy would grow at a rate of 9.5% this year.
ICRA said that the second half of the fiscal year will be more promising.
“The expanding coverage of COVID-19 vaccinations is expected to restore confidence, which will re-energise demand for contact-intensive services, helping to recover the parts of the economy most hit by the pandemic,” said Ms. Aditi Nayar, the company's chief economist.
She noted that the solid kharif harvest is anticipated to maintain agricultural sector consumer demand, while the predicted acceleration in central government expenditure after the repeal of earlier cash management measures will refuel this major source of aggregate demand.
A potential third wave of the virus, as well as existing medicines proving ineffective against emerging mutations of the virus, is the main danger to its reduced forecast of 9% GDP growth, she added.
If the average 7.9 million doses per day reported between September 1-26 is maintained, nearly three-quarters of Indian people might receive their second vaccination injection by the end of 2021, according to ICRA.
Late seeding, according to Ms. Nayar, has helped put the kharif acreage close to last year's record area. In accordance with this, the first crop production projections for 2021-22, with the exception of coarse cereals and oilseeds, showed a strong increase in kharif output, raising concerns about the unpredictably wet monsoon and flooding events.
According to this, the agency has revised up its GVA (gross value added) growth prediction for agriculture, forestry, and fisheries to 3% each in the second and third quarters of 2021-22, up from a tepid 2% rise previously projected, she noted.
The Centre's expenditure fell by 4.7% year on year in April-July 2021, to 28.8% of the 2021-22 Budget Estimates, according to the agency, which expects greater government spending to stimulate GDP in the second half of the year.
The industrial sector, on the other hand, is expected to be flat in September 2021, with semi-conductor shortages impacting on car production and GST e-way bills flattening.
Furthermore, severe rains have reduced energy consumption and are expected to skew mining and building trends.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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