New Delhi: According to a report in Live Mint, The Indian economy is expected to maintain real GDP growth of 9.0% each in FY22 and FY23 amid the uncertainty triggered by the Omicron variant of Covid-19, ratings and research firm Icra said on Tuesday.
The rating agency said the available data for Q3 FY2022 does not offer convincing evidence that the Monetary Policy Committee’s (MPC’s) criteria of a durable and sustainable growth recovery had been met, to confirm a change in the Monetary Policy stance to neutral in February 2022.
GDP Growth Recovery
According to Aditi Nayar, chief economist, ICRA Ltd, “The data for October-November 2021 does not point to a broad-basing of the growth recovery in India. After the higher-than-expected net cash outgo sought under the second supplementary demand for grants, the pace of actual Government spending is likely to determine whether the pace of GDP growth meaningfully exceeds 6.0-6.5% in Q3 FY2022″, the report said.
Similar to the trend in Q2 FY2022, the volumes of seven of the 13 high frequency indicators rose above their pre-Covid levels in October-November 2021, including GST e-way bills generation (+26.7%), non-oil exports (+26.0%), rail freight traffic (+20.2%), Coal India Limited output (+15.7%), electricity generation (+9.9%), petrol consumption (+6.4%) and ports cargo traffic (+4.0%).
However, the volumes of six of the 13 high-frequency indicators contracted in October-November, relative to October-November 2019, and in line with the trend in Q2 FY2022, suggesting that the recovery is yet to broad-base.
The subset trailing their pre-Covid performance in October-November 2021, includes scooter production (-25.1%), domestic airline passenger traffic (-22.8%), vehicle registration (-22.8%), diesel consumption (-6.8%), passenger vehicle (PV) production (-3.1%) and motorcycle production (-2.6%), the report said.
Icra said the growth momentum is not broad-based enough to confirm a change in the Monetary Policy stance to neutral in the February 2022 review.
Economic Recovery
“We expect the percentage of double-vaccinated adults to rise to 85-90% by March 2022. While the announcement of booster doses and vaccines for the 15-18 age group is welcome, it remains to be seen whether all the existing vaccines would offer adequate protection against the new Omicron variant to avert a third wave in India. In any case, fresh restrictions being introduced by several states to curb the spread of Covid-19 may temporarily interrupt the economic recovery, especially in the contact-intensive sectors in Q4 FY2022. We are maintaining our forecast of a 9.0% GDP expansion in FY2022, with a clear K-shaped divergence amongst the formal and informal parts of the economy, and the large gaining at the cost of the small,” the report said.
“Looking ahead, we expect the economy to maintain a similar 9.0% growth in FY2023. However, the expansion in FY2023 is expected to be more meaningful and tangible than the base effect-led rise in FY2022. Based on our assumptions of the GDP growth if the Covid-19 pandemic had not emerged vs. the actual shrinkage that occurred in FY2021 and the expected recovery in the next two years, the net loss to the Indian economy from the pandemic during FY2021-23 is estimated at Rs. 39.3 trillion, in real terms,” Nayar added.
Employment Scenario and Income Levels
The RBI’s latest survey of consumer confidence in urban areas points to a modest pick-up in confidence. Notably, the Future Expectation Index continued to display optimism, and recorded a mild uptick to 109.6 in November 2021 from 107 in September 2021 (above 100 indicates optimism), mainly because of improving sentiments on the overall economic situation, the employment scenario and income levels. Evidence of a rise in demand is corroborated by the jump in merchandise imports in recent months, the report said.
In ICRA’s view, rising consumption will push capacity utilisation above the crucial threshold of 75% by the end of 2022, which should then trigger a broad-based pick-up in private sector investment activity in 2023. The ratings agency also expects the visibility of tax revenue growth to spur faster government spending in 2022.
