With the Covid pandemic slowly coming under control, economists are cautiously optimistic that the path to economic recovery is becoming clearer with every passing week.
The much-criticised measures by the government and the RBI to ensure that the country’s macro-economic indicators remain in good shape are now expected to pay rich dividends.
An estimate gross domestic product (GDP) growth of 10.4% year on year (YoY) to bounce back in FY22, driven by the base effect.
However, the government has clarified that the impact of COVID-19 pandemic and lockdown on the economy, although subsiding, will continue to delay the normalisation of economic activities.
This is in respect to the contact-intensive sectors till the mass vaccination/herd immunity becomes a reality.
Although the recovery in FY22 on a YoY basis will be V-shaped, the size of the GDP will barely surpass the level attained in FY20 and will be 10.6% lower than the trend value.
It is to be noted that in the FY22 union budget, the government has set aside its fiscal conservatism & decided to provide the much-needed support to the demand side of the economy.
The private final consumption expenditure is expected to grow by 11.2% in FY22 led by pharma, healthcare, and telecom.
Investments as measured by gross fixed capital formation, is expected to grow at 9.4% YoY in FY22, ably supported by government CAPEX which is budgeted to grow at 26.2% YoY in FY22.
Despite this renewed focus by the government on CAPEX, the size of gross fixed capital formation in FY22 will still be 26.3% lower than the trend level.
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