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HomeEconomyIndia to show double-digit growth soon: Reasons

India to show double-digit growth soon: Reasons

Significant economic recovery is expected in the corporate sector's performance during FY2021-22, business leaders in India are saying

On 31 August at around 5:30 PM, the Ministry of and Programme Implementation (MoSPI) will the GDP data for the first quarter (April, May, and June). Last year, a near-complete nationwide lockdown led to a massive 24.4% YoY contraction in Q1FY21 GDP. The GDP of India had grown by 1.6% in the fourth quarter of last fiscal. The pent-up demand along with the low base is expected to accelerate the country’s economic growth rate in Q1FY22. The August 20-25 Reuters poll of 41 economists showed gross domestic product rose 20.0% in the three-month period, compared with a record contraction of 24.4% in the same quarter a year earlier.

The period from April-June 2021 had fewer stringent lockdown norms than the same period of 2020. These partial lockdowns were mainly in nature. Besides, steady growth in exports, as well as a robust performance of the agricultural sector, is expected to give a push to GDP growth.

The GDP growth is estimated at a deceptively high 20% in Q1FY22 boosted by abnormally low base of last year’s nationwide lockdown,” said Aditi Nayar, Chief Economist, Icra.

Sensex soared 765.04 points to a fresh closing peak of 56,889.76. Nifty rallied 225.85 points to record 16,931.05 on getting the news.

The growth print is likely to be supported by the relative resilience of the industrial sector in this phase of the pandemic, the steady uptick in exports and improved government capital expenditure levels apart from the base factor.

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research

India Ratings and Research (Ind-Ra) expects the aggregate fiscal deficit of states to moderate to 4.1% of the gross domestic product (GDP). The agency’s earlier forecast for FY22 was 4.3%. The impact of the second Covid wave on the economy notwithstanding, Ind-Ra estimates nominal GDP to grow 15.6% in FY22, higher than its February estimate of 14.5% in FY22.

Significant economic recovery is expected in the corporate sector’s performance during the financial year 2021-22, according to India’s business leaders. The CII CEOs poll was conducted among 117 Senior CEOs at the recent meeting of the CII National Council. The majority of the CEOs polled, about 79% of them expected GDP growth to be more than 8%.

CII CEOs poll: Responding to the question on what is affecting the animal spirits of the private sector, the majority of the CEOs (51%) indicated that Ease of Doing Business was still cumbersome at the grassroots followed by Cost of Doing Business (other than Capital cost) being high, as indicated by 32% of the CEOs.

A strong economic growth rebound is expected on the back of rapid vaccinations, a recovering monsoon boosting agricultural output, thrust on infrastructure investments by the government, and growth in export, Niti Aayog Vice-Chairman Rajiv Kumar has said.

The Reserve Bank has lowered the country’s growth projection for the current financial year to 9.5% from 10.5% estimated earlier, while the World Bank has projected India’s economy to grow at 8.3% in 2021.

Finance Minister Nirmala Sitharaman has called a meeting of the Financial Stability and Development Council (FSDC) on September 3 to discuss the state of the financial sector and a strategy to support the nascent recovery of the pandemic-hit economy. This would be the 24th meeting of the FSDC and the first during the current financial year. The last meeting was held on December 15, 2020.

According to sources, the finance minister, in the upcoming FSDC meeting, may ask financial sector regulators to relax and harmonise investment norms for instruments like infrastructure investment trusts (InvITs) to be used to monetise public assets like highways, power and railway tracks.

India’s economy is likely to have grown 18.5% in the first quarter of FY22, State Bank of India Research said in its latest edition of Ecowrap, attributing the high expansion to the base effect of negative growth in the same quarter last year.

The Reserve Bank of India had projected first-quarter growth at 21.4%. Nomura expects 29.4% growth in GDP in the quarter.

We expect GDP growth for Q1FY22 at 14% (year-on-year), largely due to a low base in Q1FY21. The subsequent quarters will see an improvement if there is no resurgence of the virus in the form of a third wave.

Brickwork Ratings’ Chief Economic Adviser M Govinda Rao

Business resumption activity continued its northward journey and reached a new high, much above the pre-pandemic levels for the week ended August 29, a Japanese brokerage said on Monday. The Nomura India Business Resumption Index rose to 102.7 for the week ending 29 August from 101.3 in the prior week, as per the brokerage.

Exports from special economic zones (SEZs) grew by about 41.5% to Rs 2.15 lakh crore during the April-June quarter of the current fiscal on account of healthy growth in pharmaceuticals, engineering, and gems and jewellery sectors, as per official data. SEZs are key export hubs that contribute about one-fourth of the country’s total outbound shipments.

Tomato prices in wholesale markets in most producing states have crashed to as low as Rs 4 per kg amid a supply glut, government data showed. The wholesale prices of tomatoes in 23 growing centres out of 31 monitored by the government were down by 50% from the year-ago period or below the three-year seasonal average.

Total FDI inflow rose to $22.53 billion during the first quarter of FY22 as against $11.84 billion in the same period last year, the commerce and ministry said in a statement. Total FDI comprises equity inflows, reinvested earnings and other capital.

The Nomura India Business Resumption Index (NIBRI) rose to 102.7 for the week ended August 29 from 101.3 the previous week, Japanese financial holding company Nomura said on Monday. However, the pace of recovery slowed in August as the index was up 5.6 percentage points (pp) after a 17.1 pp rise in July and a 15 pp rise in June.

We have projected a GVA YoY growth of 20% and a GDP growth of 22-23% for Q1FY22.

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research

Despite the Covid-19 severe shock, India’s macroeconomy is more healthy and ready for faster growth than it has been for a long time. That recovery from both the first and second waves was faster than expected points towards inherent strengths of the economy,” Ashima Goyal said.

Formal sector hiring rebounded significantly in June, after registering a dip in May, as the second wave of the pandemic ebbed out resulting in an uptick in economic activity.

With the easing of COVID-19-related restrictions by the states, the roots of the economic recovery deepened in July 2021, says a report. The unlocking in the country has manifested itself in improving performance across various high-frequency industrial and service sector indicators, mobility, and toll collections in July 2021, according to a report by Icra Ratings.

The index of consumer sentiments (ICS) improved 10.7% in July 2021 to 53.1 over June 2021, signalling a smart but incomplete bounceback after the second wave of the pandemic pulled it down to 48 in May, said the Centre for Monitoring Indian Economy. However, it was still just half of its level before the Covid-19 induced lockdowns began in March 2020 when it stood at 105.3 in February 2020.

The government looks to increase the contribution of the automobile sector to India’s GDP to 12% from the present 7.1% and grow employment generation to 50 million from the current 37 million, Union minister said on Wednesday.

India’s Wholesale Price Index in July 2021 eases to 11.16% YoY as it finally falls below 12% after seeing a record high in May. The high rate of inflation is because of the low base effect and soaring prices of crude oil and manufactured goods.

India Ratings and Research revised downward its economic growth forecast for India to 9.4% for FY22 from 9.6% estimated earlier as it does not see the entire adult population getting vaccinated by December 31 despite a strong recovery after the second Covid-19 wave.

The aggregate demand in the economy is `limping back’ but a catch-up to the pre-pandemic level will take some more time, the Reserve Bank of India said earlier in its assessment of the economy.

Consumption of daily groceries and essentials in villages outpaced cities in July, reversing the trend of June. growth was higher than in rural areas for the first time in nearly two years in June. With the Covid situation improving and good monsoon rain, rural growth is expected to bounce back and be in line with urban growth going forward.

India’s outbound shipments rose 49.85% on year to a record $35.43 billion in July, aided by growth in exports of petroleum products and gems and jewellery.

High-frequency indicators suggest higher resilience in the industrial sector compared with services, which bore the brunt of lockdowns. During the first wave, too, the was relatively less hurt because of better adaptability, fewer curbs versus services, an uptick in exports.

In the rural areas, while the pandemic spread rapidly, policy support to non-agricultural incomes was less compared with last fiscal. But the bumper rabi harvest would have cushioned agriculture incomes.

Heavy Industries Minister Mahendra Nath Pandey urged the domestic to work in the direction of increasing the manufacturing sector’s share in the country’s GDP. Share of manufacturing in GDP should be increased to 20-25%, he said at an Assocham webinar. The manufacturing sector’s share in India’s GDP is estimated at around 17% currently.

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