Icra revises India’s 2022 GDP growth forecast to 9%

The rating agency Icra raised its estimate of real GDP growth for India in 2021-22 from 8.5 percent to 9 percent on Monday.

A surge in COVID-19 vaccination, healthy projections of the kharif (summer) harvest, and faster government spending were the factors that led to the revision, the agency said in a statement.

It should be noted that after the 7.3 percent decline in 2020-21, higher growth was expected in 2021-22.

However, the second wave of COVID-19 infections early in the fiscal year, which also spread in the hinterland, made analysts more cautious. The RBI expects economic growth of 9.5 percent.

Icra said Monday it expects better prospects for the second half of the fiscal year.

“Expanding the spread of COVID-19 vaccines is likely to build confidence, which in turn will fuel demand for high-contact services and help revitalize those parts of the economy hardest hit by the pandemic,” said chief economist Aditi Nayar.

The resilient kharif crop should support consumer demand in the agricultural sector, while the expected acceleration in central government spending following the repeal of previous cash management guidelines will recharge this main driver of aggregate demand, she added.

The main risk to the revised 9 percent GDP growth forecast is a potential third wave and the ineffectiveness of existing vaccines against newer mutations of the virus, she said.

Almost three-quarters of Indian adults could get their second vaccination by the end of 2021 if the average 7.9 million doses per day are sustained between September 1 and 26, Icra estimates.

Nayar said the late sowing helped bring Kharif acreage to near the level of last year’s record. Consistent with this, initial crop production forecasts for 2021-22 signaled a robust increase in kharif production, excluding coarse grains and oilseeds, and allayed concerns raised by the uneven monsoons and flooding episodes.

On this basis, the agency has increased its gross value added (gross value added) growth estimate for agriculture, forestry and fishing in the second and third quarters of 2021-22 to 3 percent each, based on the previous forecast of a mild increase of 2 percent. She added.

The centre’s spending declined 4.7 percent year-over-year from April to July 2021 and amounted to 28.8 percent of budget estimates for 2021-22, the agency said, expecting higher government spending to spur growth in the second half of the year.

However, it was said that trends from the industrial sector remain lackluster in September 2021 as semiconductor unavailability weighs on auto manufacturing and GST-E freight bills have flattened.

In addition, heavy rains have dampened demand for electricity and are likely to distort trends in mining and construction.

(Only the headline and image of this report may have been revised by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)

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