ICRA continues to expect a prolonged negative impact of the second wave on consumer sentiment and demand
Last Updated at June 10, 2021 16:07 IST
India’s GDP growth has been projected at 8.5 per cent in FY22, said ratings agency ICRA.
As per the ratings agency, the year-on-year (YoY) growth of GDP and gross value added (GVA) at basic prices (at constant 2011-12 prices) is expected to reach 8.5 per cent and 7.3 per cent respectively, in FY2022.
“If vaccine coverage is accelerated following the re-centralised procurement policy, the GDP expansion in FY2022 may be as high as 9.5 per cent, with a widening upside in Q3 FY2022 and Q4 FY2022,” the rating agency said.
For the full year, ICRA expects the GDP growth to exceed the GVA growth by 120 basis points, based on the expectations related to the value of taxes on products and subsidies on products in FY2022.
“ICRA has taken into account the likely higher outgo towards food subsidies by the Government of India (GoI) in FY2022, relative to the budgeted level, following the decision to provide free food grains in May-November 2021.”
Besides, it has excluded the impact of the release of food subsidy arrears in FY2021, based on the clarification provided by the National Statistical Office (NSO).
Furthermore, ICRA continues to expect a prolonged negative impact of the second wave on consumer sentiment and demand with healthcare and fuel expenses eating into disposable income, and less pent-up replacement demand in FY2022 relative to FY2021.
“Notwithstanding the expectation of a normal monsoon buffering the prospects for crop output and less reverse migration in 2021 compared to 2020, we expect the combination of the sharp rise in rural infections, loss of employment as well as remittances to weaken the rural sentiment and demand.”
Moreover, the demand for contact-intensive services will revive gradually, as the Covid-19 vaccinations become more widespread.
According to Aditi Nayar, Chief Economist, ICRA: “The impact of the second wave of Covid-19 and the ensuing state-wise restrictions was seen across a variety of high frequency indicators in April-May 2021.”
“Now that the fresh cases have moderated, and restrictions are being eased, we have placed our baseline GDP growth forecast for FY2022 at 8.5 per cent.”
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.