Indian economy will expand 9.2% in the current financial year ending March, according to the first advance estimate by the National Statistical Office. It managed to recoup the losses recorded in 2020-21 when it contracted 7.3% because of the Covid-19 pandemic and the lockdown measures taken to stop its spread. However, the growth will be just 1.3% compared with the financial year 2019-20.
The rising number of Covid-19 infections could upset the GDP growth projection of the government. Several economists have forecast that the fresh wave of the pandemic may pull the GDP growth below 5% in the fourth quarter of the current fiscal. The Omicron variant of the coronavirus is spreading fast across the country, causing concerns over its impact on the economy. The second advance estimates for the year will be released on February 28.
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Actual GDP growth rate for the quarter ended September 2021 was 8.4% which followed a sharp uptick of 20.1% in the previous three months. The Reserve Bank of India has forecast that the economy will grow 6.6% in the third quarter ended December 2021 and 6% for the fourth quarter ending March 2022. The RBI growth projection for the financial year 2021-22 is 9.5%.
Government spending to boost Indian economy
Government spending and investments, two key drivers of the economy, will surpass the pre-Covid levels. However, consumption demand will remain sluggish. Government final consumption expenditure will grow 7.6% from FY21 level and will be 10.7% higher than FY20 level. Gross fixed capital formation will expand 14.9% in FY22 from 2020-21. GFCF for the current financial year will be 2.6% higher than the 2019-20 level.
The COVID-19 pandemic hit the Indian economy when it was yet to recover from the twin shocks of demonetisation and GST rollout. The pandemic has pulled down the services sector and the private final consumption expenditure, which is predicted to grow 6.8% this fiscal, but will still be below the pre-pandemic level.
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Agriculture is projected to grow 3.9% in FY2021-22 compared with 3.6% in the last fiscal. Manufacturing will expand 12.5% compared with 7.2% in 2020-21. Low base effect will propel trade, hotels, and transport services to 11.9% growth. These sectors had recorded a contraction of 18.2% last year.
GDP at current prices is estimated to be ₹232.15 lakh crore, compared with ₹197.46 lakh crore in the previous year. The advance estimates put the real gross value added at Rs 135.22 lakh crore in 2021-22, compared with Rs 124.53 lakh crore last year. This translates into an expansion of 8.6%.
The first advance estimates will form the basis of the Union budget 2022 calculations of the finance ministry officials.