GDP to grow 9.2% in FY22: NSO data
At ₹147.5 lakh crore, India’s GDP in FY22 will be above the pre-pandemic levels
NEW DELHI: The National Statistical Office (NSO) expects India’s GDP growth to be 9.2% in 2021-22, according to the first advanced estimates (AE) which were released on January 7. While this number is lower than the RBI’s projection of 9.5%, in absolute terms GDP is still expected to be higher than the pre-pandemic (2019-20) level.
Released just three weeks before the Union Budget is presented, these numbers have both good as well as bad news for the government.
The bad news is the Indian economy would have grown at a rate which is lower than the RBI projection of 9.5% even without the third wave of Covid-19 infections. The methodology for preparing the first AE does not use any statistics for the last quarter (January-March) as per the note given by the NSO. Analysts expect headwinds for growth and policy support to it going forward. “Higher CPI inflation will trigger faster policy normalization, even as scarring effects weigh on growth from mid-2022 onwards”, said a Nomura Global Markets Research note.
To be sure, at ₹147.5 lakh crore, India’s GDP in 2021-22 will still be marginally above the prepandemic (2019-20) value of ₹145.7 lakh crore. What is of concern, however is the fact that at ₹1,07,801 India’s per capita GDP in 2021-22 is going to be lower than its pre-pandemic value of ₹1,08,645. The fall in per capita private consumption is even larger. It is expected to be ₹59,043 in 2021-22 compared to the pre-pandemic value of ₹62,056. This is in sync with the fact that Private Final Consumption Expenditure (PFCE) will not reach pre-pandemic levels even in 2021-22. At 54.8%, the share of PFCE in overall GDP is expected to be the lowest in the last three years, which underlines the criticality of restoring mass demand for restore growth.
“The fact that we have already seen a downward revision from the RBI’s projection in the first AE numbers underlines the need to acknowledge the fact that the economic recovery isn’t as good as was being assumed”, said Himanshu, associate professor of economics at Jawaharlal Nehru University.
“Higher inflation and the pain from the third wave is going to hurt even more. It is important that the budget takes these factors into account and keeps its focus on boosting mass demand”, he added.
The good news is on the fiscal front. At 17.6%, the nominal GDP growth is significantly above the projection of 14.4% which was used in the 2021-22 Budget. At 8.4 percentage points, the nominal growth component of GDP is expected to be the highest since 2011-12, when the real and nominal GDP growth rates were 5.2% and 14.4% respectively. Nominal GDP in 2021-22 is expected to be ₹232.1 lakh crore compared to the ₹222.9 lakh crore projection given in the budget. This means that the government’s revenue growth is likely to exceed its budget estimates; revenues are a fraction of nominal incomes. However, as was pointed out in an HT analysis published on December 6, 2021, a higher nominal growth component also means that fiscal boost will be of a smaller magnitude.
In terms of sector-wise Gross Value Added (GVA), all sectors of the economy are expected to shoe positive growth. Apart from the Trade, Hotel,
Transport, Communication and Services related to Broadcasting sub-component of the services sector, all other major sectors are expected to jump back over pre-pandemic levels. Agriculture and allied activities, which grew at 3.6% in 2020-21 is expected to grow at 3.9% this year, while manufacturing is expected to grow at 12.5% on the back of a 7.2% contraction last year.
These numbers are expected to change going forward when the NSO released the first revised estimates of 2020-21 GDP on January 31 and the December 2021 quarter GDP numbers on February 28.