Union Budget 2021 | FY22 nominal GDP growth pegged At 14.4%

Representative image (PC- MoneyControl.Com)

The government, on February 1, projected that India’s nominal gross domestic product (GDP) would grow by 14.4 percent for FY 2022 while the revenue deficit revised for FY 2021 stood at 7.5 percent of GDP, signalling an early move back to a faster lane, leaving behind the piling rubble of the COVID-19 pandemic.

Among other details, the revenue deficit for FY 2022 is seen at 5.1 percent of the GDP. The gross market borrowing for FY 2022 is pegged at Rs 12.06 lakh crore, while the net market borrowing (for FY22) is pegged at Rs 9.25 lakh crore. Meanwhile, the gross market borrowing for FY 2021 is pegged at Rs 12.80 lakh crore and the net market borrowing for the same period has been pegged at Rs 10.53 lakh crore.

This would result in a significant positive swing from the current year where the economy slipped into a recession for the first time in more than four decades.

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The Central Statistics Office’s (CSO’s) first advance estimates released last month, projected that India’s nominal GDP will decelerate (-) 4.2 percent. The budget does not put out real or inflation-adjusted GDP growth projections.

Adjusted for inflation, India’s real GDP, according to the government estimates will decelerate at (-) 7.7 percent in 2020-21.

Unlike other recessions caused by systemic flaws such as the debt bubble of 2008, this has been brought upon by a medical emergency. Will India pass through multiple peaks and troughs spanning several quarters before reaching a steady growth state?

The International Monetary Fund (IMF) has projected that India's real gross domestic product (GDP) growth will sizzle at 11.5 per cent in 2021 followed by 6.8 per cent growth in 2022.

This would be a perfect example of a textbook V-shaped recovery. This is the best-case scenario that everyone is hoping for.

This happens when the economy rockets back as quickly as it had fallen, aided by a government stimulus that pushes up demand. Income and output rises, demand grows and higher spending by households prompt companies to add capacity lines and hire more.