Economic Survey pegs FY22 GDP growth at 11%
NEW DELHI: The Economic Survey 2021-22 projected a growth of 11% for the Indian economy, a V-shaped recovery in growth, on the back of the Covid-19 vaccination drive and a recovery in consumption, even as it emphasised the importance of the government continuing to increase its spending and called for an asset quality review across Indian banks.
The survey, which sets the economic context for the Union Budget — to be presented on Monday — also sought an increase in public health spending to 2.5-3% of GDP (the budget is expected to boost public health spending in the wake of the Covid-19 pandemic, which highlighted gaps in India’s health infrastructure). It also said it expects inflation, a concern right now, to moderate in coming months, creating the context for the central bank to cut rates. The Survey estimated a nominal GDP growth of 15.4% in 2021-22.
The thread running through the Survey — a sharp economic revival — comes at a time when the Indian economy is expected to contract by 7.7% in 2020-21. However, its projection is in keeping with the International Monetary Fund’s recent forecast that said India would be the fastest growing major economy in the world with a growth of 11.5% in 2021-22 and 6.8% in 2022-23. At 11% growth, India will end 2021-22 with a GDP that’s 2.45% higher than its 2019-20 one, effectively recovering from the pandemic-induced economic slump in two years. “The Economic Survey 2020-21 makes a candid and convincing assessment of the Indian economy based on objective analysis, enriching content and credible policy direction to take the economy forward,” said Chandrajit Banerjee, director general, CII.
Acknowledging that pursuing counter-cyclical fiscal policy boosts growth during economic downturns, the Survey findings are in concurrence with CII’S recommendation on having a higher deficit print, albeit within reasonable limits. “This will result in faster growth and smaller deficits in the future,” he added.
The survey also presented a firm defence of the government’s response to the health and economic disruption inflicted by the pandemic. A stringent but timely lockdown prevented 3.7 million cases and around 100,000 deaths from Covid-19, the survey said. It added that a fiscal stimulus during the lockdown would have been a futile exercise comparable to pressing the accelerator and the brake at the same time, and pointed out that the government has delayed the fiscal boost to coincide with the rollout of a vaccine. The ongoing recovery will gain from the structural reforms in factor markets as well as streamlining of regulations in the medium term, the survey claimed.
The architect of the survey, chief economic adviser (CEA) Krishnamurthy V Subramanian said India’s policy response was well timed as it first focused necessities such as providing free food to 800 million poor badly hit by a hard lockdown and lost jobs and support to the industry through emergency credit and liquidity measures.