Ind-Ra revises GDP growth forecast to 9.4% in FY22

by mehekkaoberoi

Bасkgrоund:-

  • India Ratings and Research (Ind-Ra) has revised its Gross Domestic Product(GDP) growth forecast for FY22 on Thursday the 19th of August.
  • As per the earlier prediction of the agency,If India is able to vaccinate its whole adult (18+) population by December 31, 2021, GDP growth in FY22 was predicted to be 9.6% .
  •  Otherwise, it could fall to 9.1%. According to current vaccination rates, India will very certainly not be able to vaccinate its full adult population by December 31, 2021.
  • From August 18 through March 31, the CDC estimates that 5.2 million doses will need to be provided daily to fully vaccinate more than 88 percent of the adult population and administer single doses to the rest.

Linkаges:-

  • Only government final consumption expenditure (GFCE), private final consumption expenditure (PFCE), gross fixed capital formation (GFCF), and exports have shown decent growth, according to Ind-Ra, with GFCE averaging 5.7 percent between FY19 and FY21.
  • With the ebbing of the second wave of the pandemic, several high frequency indicators are showing a faster rebound than expected, indicating a significant pick-up with the revival of the south-west monsoon, and exports volume and growth showed a surprise turnaround in Q1FY22, according to the rating agency.
  • The agency said PFCE (private final consumption expenditure) growth after a gap of three consecutive quarters turned positive in the January-March quarter and was expected to maintain the momentum.
  • But the Covid second wave hit the country in April and May 2021 with such speed and scale that once again there has been a push back to PFCE. Ind-Ra thus expects PFCE growth to come in at 10.4 per cent in FY22 compared with 10.8 percent predicted earlier.

Сurrent  Sсenаriо:-

  • India Ratings (Ind-Ra) on Thursday (August 19) lowered its FY22 gross domestic product (GDP) growth estimate for India to 9.4 percent from 9.6 percent.
  • With the Covid-19 pandemic still lurking over the Indian economy, Ind-Ra estimates that households would not see a big increase in their income in the immediate to medium term.”
  • This, combined with low consumer confidence and depleted savings, is anticipated to constrain consumer demand growth.

Imрact:-

  • The rating agency further said that the Indian economy had begun to witness a consumption slowdown even before the Covid-19 pandemic hit it.The lockdown caused by the pandemic in FY21 only aggravated it as jobs, livelihoods and household budgets were severely dented.
  • Disposable income of the rural population has been severely impacted by the second wave.
  • The rise in oil prices is one of the biggest factors feeding the inflation, pointing out that RBI has been urging the government to reduce the taxes and duties on the commodity which lead to inflationary pressures.
  • The government is not heeding to such calls because it feels the resentment within the public is not very high enough for it to act. Therefore, it is continuing to keep the taxes and duties at elevated levels which accrues higher revenues which can be then distributed for public schemes.
  • However, The RBI estimates 9.5% growth for FY22 while other analysts’ estimates vary from 7.9% to double digit.

content contributed by- Meghna.Manoj

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