Economic Survey 2020-21: ‘Growth rebounding to 11% in FY22’

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January 30, 2021 4:49 AM

Supply side push via regulatory easing, leg up to infra, PLI scheme, rise in consumption, low interest rates to fuel GDP expansion

Nominal GDP will likely grow at 15.4% in FY22.Nominal GDP will likely grow at 15.4% in FY22.

The economy is witnessing a V-shaped recovery, with real GDP expected to expand at 11% in the next fiscal, leaving behind the scars of “once-in-a-century crisis” unleashed by the Covid-19 pandemic, according to the Economic Survey of FY21.

This would “entail a growth in real GDP by 2.4% over the absolute level of 2019-20 – implying that the economy would take two years to reach and go past the pre-pandemic level”, the survey said. Nominal GDP will likely grow at 15.4% in FY22.

Even these are “conservative” estimates and reflect “upside potential”, which can manifest due to the continued normalisation in economic activities as the rollout of Covid-19 vaccines gathers steam, the Survey says.

For the current fiscal, the real GDP will contract by 7.7% and nominal by 4.2%, the National Statistical Office (NSO) has recently forecast. On Friday, the NSO revised down the country’s FY20 real growth rate to 4% from 4.2% reported earlier. But it also raised the FY19 growth to 6.5% from 6.1%.

The FY22 growth will further be supported by supply side push from reforms and easing of regulations already undertaken and leg-up to infrastructural investments, the survey said. The boost to the manufacturing sector through the production-linked incentive schemes, recovery of pent-up demand for the services sector, increase in discretionary consumption subsequent to vaccine roll-out and a pick up in credit given adequate liquidity and low interest rates will further aid growth.

The Survey’s forecast is a tad lower than 11.5% real growth for next fiscal projected by the International Monetary Fund (of course, on a more depressed base). India is expected to emerge as the fastest growing economy in the next two years, as per the IMF.

Chief economic advisor Krishnamurthy V Subramanian asserted that even without the lockdown, Covid-19 pandemic would have created a significant economic impact. But what the lockdown did was to ensure a coordinated response that saved both lives and livelihoods.

India’s policy response to the pandemic was guided by the realisation that growth will return, but not lost human lives. Early intense lockdown saved lives and helped faster recovery, he stressed.

“The scores of lives that have been saved and the V-shaped economic recovery that is being witnessed – due to the causal impact of the initial lockdown – bear testimony to India’s boldness in taking short-term pain for long-term gain,” the survey said.

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