GDP to expand by 10.1% in FY22: ICRA

India’s GDP is expected to witness a record a double-digit expansion of 10.1% in FY22 but the value of the GDP will only mildly surpass the level that had been recorded in FY20, ICRA said in a report.

“After a 7.8% pandemic-driven shrinkage in the ongoing fiscal, India’s real GDP is projected to record a growth of 10.1% in FY2022.The seemingly-sharp expansion will be led by the continued normalisation in economic activities as the roll out of COVID-19 vaccines gathers traction, as well as the low base,” Aditi Nayar, principal economist, ICRA Ltd., said.

“We expect a multi-speed recovery in FY2022, with the contact-intensive sectors, discretionary consumption and investment by the private sector trailing the rest of the economy, in the arduous march back to attaining, and sustaining, pre-COVID-19 levels. On a sobering note, we project the aggregate value of the Indian GDP in real terms in FY2022, to be only mildly higher than the level recorded in FY2020,” she said.

The rating agency said the Monetary Policy stance may be changed to neutral from accommodative in the August 2021 Policy review or later, after greater certainty on the durability of the awaited economic revival.

Additionally, ICRA has anticipated that the economic recovery will exert a divergent impact on the twin deficits, with a decline in the fiscal deficit, and a reversion of the current account to a deficit in FY2022 from the surplus expected in FY2021.

As per ICRA the headline CPI inflation is likely to decline to 4.6% in FY2022 from 6.4% in FY2021, while exceeding the mid-point of the Monetary Policy Committee’s (MPC’s) medium target of 4.0%, for the third consecutive year.

“A favourable base would moderate the retail food inflation to an average of 4.7% in FY2022 from 8.0% in FY2021, despite the pressures from edible oils, and protein items such as pulses. With demand expected to strengthen both domestically and globally, ICRA is apprehensive that the core-CPI inflation may remain relatively sticky, and display a limited correction to 4.4% in FY2022 from 5.5% in FY2021,” it said in the report.

Source: Read Full Article