India's GDP is projected to grow 8-8.5% in the 2022-23 fiscal year, the Economic Survey presented by Finance Minister Nirmala Sitharaman on Monday, January 31 said. The Economic Survey that details the state of the economy ahead of the government's Budget for the fiscal year beginning April 1, 2022. The Economic Survey pegs the GDP growth at 8-8.5%, as compared to the 9.2% GDP expansion projected by the National Statistical Office (NSO).
The economy contracted by 7.3% in 2020-21 on account of the impact of the COVID-19 pandemic and subsequent nationwide lockdowns to check the spread of coronavirus.
“With the vaccination programme having covered the bulk of the population, economic momentum building back and the likely long-term benefits of supply-side reforms in the pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5% in 2022-23.” Nonetheless, it pointed out that the global environment still remains uncertain, and that the projection is based on the assumption there will be no further debilitating pandemic-related economic disruption, a normal monsoon, an oil price projection at $70-75 per barrel (as opposed to the current price of $90), easing of global supply chain disruptions and more.
According to the report, economic activity has recovered to pre-pandemic levels, and growth in the 2022-23 fiscal will be supported by vaccine coverage, gains from supply-side reforms and easing of regulations.
The survey said that agriculture and allied sectors have been the least impacted by the pandemic, and is expected to grow 3.9% in the 2021-22 fiscal, up from 3.6% in the previous year. It suggested that the government give priority to crop diversification, allied farm sectors and alternative fertilisers like Nano urea. The Economic Survey also pitched for increasing agriculture research and development (R&D) and organic farming, besides use of new technologies like drones.
On the other hand, the services sector has been hit the hardest, and had seen a contraction of 8.4% in the 2020-21 fiscal. Now, it has been projected to grow at 8.2%.
"At the time of writing, a new wave in the form of the Omicron variant was sweeping across the world, inflation had jumped up in most countries, and the cycle of liquidity withdrawal was being initiated by major central banks. "Despite all the disruptions caused by the global pandemic, India's balance of payments remained in surplus throughout the last two years," it said.
This trend, it said, has allowed the Reserve Bank of India to keep accumulating foreign exchange reserves. "The combination of high foreign exchange reserves, sustained foreign direct investment, and rising export earnings will provide an adequate buffer against possible global liquidity tapering in 2022-23."
It also added that Air India’s privatisation is key to boosting the Union government’s privatisation drive as well as getting disinvestment proceeds.
It added that the country’s total consumption is estimated to have grown by 7% in FY22 with government consumption being the biggest contributor. The Survey said that the government consumption was estimated to grow by a strong 7.6%, thereby surpassing the pre-pandemic levels. Besides, private consumption is also estimated to have improved significantly to recover 97% of the corresponding pre-pandemic output level. However, the recent dip in vehicle registrations reflects persistent supply-side constraints owing to the shortage of semiconductor chips rather than lack of consumption demand, it added.
"Also indicative of uptick in consumer sentiments is the steep rise in digital transactions, notably in UPI payments owing to the pandemic induced shift to contactless payments," the Survey said.
Going ahead, private consumption is poised to see stronger recovery with rapid coverage in vaccination and faster normalisation of economic activity, it added.
“COVID-19 vaccination should be treated as a macro-economic indicator since it is not merely a health response but is critical for opening up the economy,” it said. The country crossed the milestone of administering more than 156 crore doses of vaccines on January 16, 2022.
With inputs from agencies