India set to clock 9.2% growth in 2021-22

India’s economy will expand at a 9.2 per cent annual pace in the current financial year ending on March 31 2022, reaffirming Asia’s third-largest economy’s status as one of the fastest growing major economies in the world, the government’s annual economic survey released on Monday said.

The Economic Survey 2021-22, tabled by Finance Minister Nirmala Sitharaman in Parliament, projected the economy to grow by 8-8.5 per cent in the next fiscal beginning April 1, after it suffered a 7.3 per cent contraction the year before.

India’s remarkable rebound, after its worst economic performance in 40 years, will be supported by “widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending,” the survey said. “The projection is based on the assumption that there will be no further debilitating pandemic related economic disruption.”

The size of the Indian economy, based on current prices in dollar terms, is estimated to be $3.1 trillion. It is currently the sixth-largest in the world, behind the US, China, Japan, Germany and the UK. The country is likely to overtake Japan as Asia’s second-largest economy by 2030 when the country’s GDP is projected to surpass that of Germany and the UK to rank as the world’s No.3.

According to the World Bank, India’s GDP will exceed $10 trillion in the next 25 years when it will be marking 100 years of independence.

The government has set a target of achieving $5 trillion GDP by FY25. In order to achieve the $5 trillion goal, India needs to spend about $1.4 trillion over this period on infrastructure. During financial years 2008-17, India pumped in about $1.1 trillion on infrastructure. However, the challenge is to step up infrastructure investment substantially, Sanjeev Sanyal, principal economic advisor, said at a presser following the release of the survey.

“Keeping this objective in view, the National Infrastructure Pipeline (NIP) was launched with projected infrastructure investment of around $1.5 trillion during FY 2020-2025 to provide world-class infrastructure across the country, and improve the quality of life for all citizens.

India now has one of the highest forex reserves in the world, and equivalent to 13.2 months of imports. There has been a sharp increase in both tax and non-tax revenue, Sanyal said, adding that the growing culture of startups in India is a strong indicator of a recovering economy.

India has the third largest startup ecosystem in the world after the US and China. The country saw the birth of 44 unicorns in 2021, a new record.

The survey said India climbed 35 notches in the Global Innovation Index, from 81st in 2015-16 to 46th in 2021. Patents granted in India have gone up to 28,391 in 2020-21 from 7,509 in 2010-11 while Indian residents seem to have outpaced multinational corporations in the number of patent applications.

Climate finance will remain critical to successful climate action for India to achieve its net-zero carbon emission target by 2070, it said.

According to the survey, India’s economic response to devastation caused by pandemic has been supply-side reforms, rather than demand management. The country now has one of the highest forex reserves in the world, and equivalent to 13.2 months of imports.

Its agile policy response differed from the waterfall strategy of introducing front-loaded stimulus packages, adopted by most other countries in 2020.

Robust export growth and availability of fiscal space are expected to ramp up capital spending to support growth next fiscal while private sector investment is projected to pick with the financial system in good position to provide support to revival of the economy, said the survey.

The survey said Air India privatisation is key in boosting the government’s privatisation drive and called for private participation in all sectors.

The survey forecast that government finances would witness consolidation in 2021-22, after uptick in deficit and debt indicators in the previous year.

— issacjohn@khaleejtimes.com