Moneycontrol PRO
UPCOMING EVENT:Watch India’s Best Managed Companies 2021, Deloitte’s global marquee programme for private companies on 17th Sept, 12 pm. Register Now!
you are here: HomeNewsTrends

FY22 GDP growth projected at 8.5%: ICRA

ICRA had earlier estimated the GDP to grow at 10-11 percent rate; however, it had later revised it down to 10-10.5 percent for FY22.

June 10, 2021 / 04:43 PM IST
According to ICRA, after the satiation of the pent-up demand seen during the festive season in 2020, purchases of consumer durables may be restricted, which would impact capacity utilisation in FY2022.

According to ICRA, after the satiation of the pent-up demand seen during the festive season in 2020, purchases of consumer durables may be restricted, which would impact capacity utilisation in FY2022.

Ratings agency ICRA on June 10 said that it expects India's GDP to grow at 8.5 percent in FY22.

ICRA had earlier estimated the GDP to grow at 10-11 percent rate; however, it had later revised it down to 10-10.5 percent.

"If vaccine coverage is accelerated following the re-centralised procurement policy, the GDP expansion in FY2022 may be as high as 9.5 percent, with a widening upside in Q3 FY2022 and Q4 FY2022," the rating agency said.

For the full year, ICRA expects the GDP growth to exceed the GVA growth by 120 bps based on the expectations related to the value of taxes on products and subsidies on products in FY22.

ICRA expects a prolonged negative impact of the second wave on consumer sentiment and demand, with healthcare and fuel expenses which would eat into disposable income. It also expects a less pent-up/replacement demand in FY22 relative to previous year.

Close

"The impact of the second wave of Covid-19 and the ensuing state-wise restrictions was seen across a variety of high frequency indicators in April-May 2021. Now that the fresh cases have moderated, and restrictions are being eased, we have placed our baseline GDP growth forecast for FY2022 at 8.5%," said Aditi Nayar, Chief Economist, ICRA.

According to ICRA, after the satiation of the pent-up demand seen during the festive season in 2020, purchases of consumer durables may be restricted, which would impact capacity utilisation in FY2022.

However, a rise in exports in tune with the expected vaccine-induced rebound in certain large economies, may boost capacity utilisation in export-oriented sectors, it noted.

"Looking ahead, with capacity utilisation likely to remain moderate and sentiment expected to be cautious, given the suddenness of the second Covid surge, ICRA expects a gradual and sector-specific pick-up in private investment activity in H2 FY2022," the agency said.

ICRA said that if the vaccine coverage is accelerated following the re-centralised procurement policy, the GDP expansion in FY22 may be as high as the Monetary Policy Committee’s (MPC'S) forecast of 9.5 percent, with higher growth in Q3  and Q4 of FY22.

"ICRA continues to expect subdued domestic demand to constrain pricing power, squeezing margins in many sectors. With the CPI and WPI inflation expected to average 5.2% and 9.2%, respectively," it said.

The ratings agency expects the nominal GDP to expand by 15-16 percent in FY22.
Shreeja Singh
first published: Jun 10, 2021 04:43 pm

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark