India’s economy is expected to have grown at 9.2 per cent in the fiscal ended March 2022, after having contracted by 7.3 per cent in the previous financial year, aided by resilience in the rural economy, uptick in bank credit and rising GST collections, a note by Bank of Baroda said.
As per government’s advance estimates, the gross domestic product (GDP) in FY22 is projected to grow by 8.9 per cent.
The National Statistical Office (NSO) will release the final GDP growth figures for FY22 on May 31.
Bank of Baroda (BoB), in a note on GDP expectations by its Economic Research Department, said it expects the economy to post higher growth in the last quarter ended March as mobility improved, allowing opening up of economy with much lower COVID-19 cases across states.
Contact-intensive sectors are expected to make stronger recovery, and the economy is projected to grow by 5.5 per cent in Q4 FY22 against 5.4 per cent in Q3, it said.
A much needed pick up will be visible in services sector, with travel and hospitality contributing significantly. Construction is also likely to edge upwards.
However, agriculture growth might be a tad slow as compared to government expectations (3.3 per cent against government estimate of 3.5 per cent) owing to lower yield of wheat crops, conflict between Russia-Ukraine and heat wave conditions, as per the research note.
BoB said these might pose downside risks to its projections. Industrial growth might be adversely impacted too.
It said India’s economy is poised to recover in FY22 after contracting by 7.3 per cent in FY21.
The main factors contributing to this kind of growth are — resilience shown by the rural sector with normal monsoon and higher production of foodgrains; uptick in bank credit growth to push financial services and improvement in services sector with passenger traffic (-62 per cent to 59 per cent), rail freight (2 per cent to 15 per cent) and port cargo (-4.6 per cent to 7 per cent) leading the race.
Higher GST collections have also provided much needed support.
“Against this backdrop, we expect GDP growth at 9.2 per cent in FY22,” Bank of Baroda said.
However, there are downside risks emanating from the ongoing Russia-Ukraine conflict, soaring of commodity prices and acceleration in global inflation going ahead, it added.
Further, aggravating heat wave conditions have curbed wheat output and added some pressure to industrial growth.
A mix of both monetary (RBI frontloading with rate hike) and fiscal policy (reduction in excise duties) at play is expected to boost growth prospects, it contended.
The International Monetary Fund (IMF) expects India’s economy to grow by 9 per cent in FY22, while Asian Development Bank (ADB) has projected India’s growth at 7.5 per cent.
“However, we expect the economy to do much better sequentially specially on the back of base effect and normalisation of economic activity.
“The overall impact of Omicron variant which resulted in the 3rd wave of COVID-19 seems to be relatively muted than was initially anticipated. Further, rapid pick up in the pace of vaccination programme is also expected to support growth,” as per the research note by the public sector lender.