Base Effect: India’s FY22 GDP expected to grow 10.4%, says Ind-Ra

New Delhi, Feb 10 : India’s gross domestic product (GDP) growth will bounce back to 10.4 per cent year-on-year (YoY) in FY22, primarily driven by the base effect, said India Ratings and Research (Ind-Ra).

Accordingly, the ratings agency’s estimates showed that after recording negative growth during 9MFY21, GDP growth will finally turn positive at 0.3 per cent YoY in 4QFY21.

“Although the recovery in FY22 on a YoY basis will be V-shaped, the size of the GDP will barely surpass the level attained in FY20 and will be 10.6 per cent lower than the trend value.”

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“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 or herd immunity becomes a reality.”

In the FY22 Union Budget, the Centre set aside its fiscal conservatism and decided to provide the much-needed support to the demand side of the economy, which had been missing in the ‘Atmanirbhar’ package announced earlier.

“As a result, Ind-Ra expects the government’s final consumption expenditure to grow 10.1 per cent YoY in FY22. Although the private final consumption expenditure was witnessing a slowdown even before the imposition of Covid-19 lockdown, it is expected to grow by 11.2 per cent in FY22, led by essentials, followed by non-discretionary consumer goods, infrastructure, industrial goods and cyclical sectors.”

“Yet, Ind-Ra’s estimates show that the private final consumption expenditure in FY22 will be 14.2 per cent less than the trend level.”

According to Ind-Ra estimates, investments as measured by gross fixed capital formation will grow at 9.4 per cent YoY in FY22, ably supported by government capex which is budgeted to grow at 26.2 per cent YoY in FY22.

“Despite this renewed focus by government on capex, the size of gross fixed capital formation in FY22 will still be 26.3 per cent lower than the trend level.”

Besides, Ind-Ra projected the agricultural gross value added to grow 3 per cent YoY in FY22.

“This is based on the expectation of normal and spatially well-distributed rainfall in 2021. Although the second advanced estimate of production of food grains for FY21 is still not out, Ind-Ra expects the Rabi harvest of 2021 to be good.”

“The area under Rabi sowing at 651.9 lakh hectares by January 15, 2021 is 1.6 per cent YoY higher. The industrial output as captured by Index of Industrial Production continues to be volatile, and select segments of services sector such as hotels, leisure/travel/tourism, sports, entertainment are still at some distance away from seeing any visible traction.”

“Ind-Ra believes them to still witness growth in FY22 mainly due to the base effect. Ind-Ra expects industrial and services sector to grow at 11.5 per cent and 11.4 per cent YoY, respectively, in FY22.”

Disclaimer: This story is auto-generated from IANS service.

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