GDP to grow at 11% in FY22, says Crisil

‘Investment-focused govt. spend to be among growth factors’

Crisil on Tuesday said it expects the Indian economy to grow at 11% in fiscal 2022, after an estimated 8% contraction this fiscal due to the impact of the COVID-19 pandemic.

The growth, it said, will be driven by four factors — people learning to live with the new normal, flattening of the COVID-19 affliction curve, roll-out of vaccines, and investment-focused government spending.

“However, as in this fiscal, the pace of growth will differ in the first and second halves next fiscal. While the first half will benefit optically because of low-base effect, the second half will see a more broad-based pick-up in economic activity,” Crisil said. The agency, however, warned that the recovery would not be easy, with scars of the pandemic running deep for small businesses and the urban poor. The rural economy had been more resilient versus the urban, and services were lagging manufacturing in recovery, Crisil said. It also noted that trade had normalised faster than the rest of the economy, with both exports and imports scaling pre-pandemic levels.

“GDP growth would average 6.3% between fiscals 2023 and 2025. That would be lower than the 6.7% average growth seen in the decade preceding the pandemic, but higher than the 5.8% average in the three fiscals prior,” Crisil said. “Despite the growth, the Indian economy will suffer a permanent loss of 11% of GDP in real terms over fiscals 2022-2025,” the rating agency said, adding that the size of the economy next fiscal will be a mere 2% bigger in real terms than in fiscal 2020.

Corporate revenues, it said as per a study of 800 firms across 35 sectors, excluding oil, banking, financial services and insurance, for the first nine months of this fiscal shows contraction of only 8% on average compared with far grimmer prognostications at the peak of the pandemic. Next fiscal, revenue should grow 15-16%, led by volume recovery across sectors on two consecutive low-base years and higher investment spend by the government, especially on core infra segments of roads, railways and urban infrastructure, Crisil said. “Shorn of the optical base-effect, revenue will be only 8-9% higher than in fiscal 2019,” it said.

Amid the pandemic, revenue of small firms saw a sharper dip relative to large firms due to lower bargaining power and cash crunch. According to CRISIL Research, less than 20% of 400 smaller companies (among about 800 listed ones) saw positive revenue growth in the first half of fiscal 2021, compared with 35% of the top 100 companies.

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