Economy to get shot in arm from budget: Poll

India’s path to economic recovery will be stronger than previously thought as fiscal expansion and vaccine hopes help the country heal from Covid19, a Reuters poll of economists showed.

The vaccination drive and a steep fall in new coronavirus cases is supporting a recovery in the economy.

Alongside that, nearly 60 per cent of respondents, 18 of 31, who responded to an additional question in the January 13-25 poll said the Union budget would help a significant economic recovery in financial year

2021-22.

“We expect global economic activity to return to normality in fiscal Q2 and India to grow in fiscal

2021-22, with government stimulus packages expecting to contribute,” said Hugo Erken, head of international economics at Rabobank.

“There is a strong sentiment the budget will aim to continue expenditure as growth is the only way India can come out of recent setbacks.”

The poll of over 50 economists showed the economy would grow 9.5 per cent next fiscal year—the highest since polling began for the year in March 2020—after contracting 8 per cent in the current fiscal year.

It was expected to grow 6 per cent in fiscal year 202223. The poll predicted the economy would grow 21.1,

9.1, 5.9 and 5.5 per cent in each quarter of the 2021-22 fiscal year, largely upgraded from a poll taken two months ago.

But when asked how long it would take for the economy to recover to its

pre-Covid-19 level, 26 of 32 respondents said it would take up to two years, including six analysts said longer than that. Twelve analysts said within a year.

“There is a lack of fiscal space to boost growth sufficiently and India is unlikely to reach its preCovid-19 levels any time soon despite policy support,” said Sher Mehta, director at Virtuoso Economics.

“Economic momentum will struggle to gain traction as there are fears of stagflation and the possible end of monetary policy easing.”