Indian economy likely to record 9.2% growth in 2021-22

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India's GDP will likely grow 9.2 percent in FY22, according to the Ministry of Statistics and Programme Implementation.

The expansion of the Indian economy, as per the statistics ministry's first advance estimate of GDP for 2021-22 released on January 7, is lower than the forecast by the Reserve Bank of India (RBI).

The central bank had last month reiterated its GDP growth forecast of 9.5 percent for FY22.

While the estimated GDP growth rate of 9.2 percent for FY22 is the highest in at least 17 years, it has been aided by an extremely favourable base effect, with the GDP having contracted by a record 7.3 percent in FY21 on account of the COVID-19 pandemic.

As per the first advance estimate, which is based on available data for the first two to three quarters of the financial year, growth in gross value added for FY22 has been pegged at 8.6 percent.

GDP is seen growing 17.6 percent in FY22 in nominal terms.

With India's GDP having grown 13.7 percent in April-September 2021, the first advance estimate suggests the GDP will grow 5.6 percent in the second half of FY22.

The RBI's forecast last month said India's GDP was seen growing 6.6 percent in October-December 2021 and six percent in January-March 2022.

Commenting on the GDP advance estimates revealed by the Ministry of Statistics and Programme Implementation, Aditi Nayar, Chief Economist, ICRA Limited, said: “The advance estimates for real GDP and GVA growth as well as the nominal GDP expansion are broadly in line with our own expectations (9.0 percent, 8.8 percent, and 17.5 percent, respectively).”

“The implicit GDP growth of 5.6% for H2 FY2022 built in by the NSO may not fully factor in the admittedly evolving impact of Omicron. Our sense is that after a 6.0-6.5% rise in Q3 FY2022, the GDP expansion is set to slip below five percent in the ongoing quarter.”

Brickwork Ratings, too, said that the advance estimate of GDP for FY22 released by the Ministry of Statistics and Programme Implementation (MOSPI) are more optimistic at 9.2 percent, considering the supply bottlenecks, coal, power, and semiconductor shortages and looming third wave of the pandemic.

“The advance estimates are the extrapolation of the numbers based on the six to eight months of the current fiscal,” the credit rating agency said.

It added: “The estimates serve as an essential input to the upcoming Budget exercise for the next fiscal. An increase in the nominal GDP at 17.6 percent provides additional expenditure space for the government. As per the nominal GDP estimates, the budgeted fiscal deficit for FY22 works out to be 6.5 percent of the GDP. Despite the shortfall in disinvestment proceeds and additional demand for supplementary grants, the fiscal deficit target of 6.8 percent of GDP is likely to be achieved in FY22. The 17.6 percent increase in nominal GDP also results in a substantial decline in the debt to GDP ratio, which is the focus of FRBM.”