India Ratings and Research on Thursday revised its economic growth projection for the current fiscal to 9.4 per cent year-on-year from its previous expectations of 9.1-9.6 per cent. The rating agency said the growth is directly proportional to how soon the 18 above age population gets vaccinated.   

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Similarly, it expects the first quarter of FY22 would see a 15.3 per cent growth, While 8.3 per cent in the second quarter and 7.8 per cent in each of the remaining two quarters of fiscal 2022.

 

The rating agency lists out the reason behind the GDP (gross domestic product) revision: “1) Several high frequency indicators are showing a faster rebound than expected with the ebbing of second wave of Covid; 2) Kharif sowing is indicating a significant pick-up with the revival of south-west monsoon and 3) Exports volume and growth showed a surprise turnaround in 1QFY22.”

The agency says despite all these factors the FY22 GDP yet will be 10.9 per cent lower than the trend value.

In June, the rating agency had said that the gross domestic product (GDP) would grow by 9.6 per cent if the country is able to vaccinate its entire adult population by December 31 this year, but economic expansion might slip to 9.1 per cent if that could not be done.

"Going by the pace of vaccination, it is now almost certain that India will not be able to vaccinate its entire adult population by December 31 this year," India Ratings' said in a report.

The agency’s estimate suggests that 5.2 million daily doses would have to be administered from now on to fully vaccinate more than 88 per cent of the adult population as well as to administer single doses to the rest by March in the current financial year.

India Rating’s said of the four demand-side growth drivers -- private final consumption expenditure (PFCE), government final consumption expenditure (GFCE), gross fixed capital formation (GFCF) and exports -- only GFCE has shown somewhat decent growth, averaging 5.7 per cent during FY'19-FY'21. PFCE, GFCF and exports during this period grew 1.3, 1.5 and 1.5 per cent, respectively.

The Reserve Bank of India has maintained its estimate of 9.5 per cent growth for 2021-22 while other analysts' estimates vary from 7.9 per cent to double digit.

It said that the high growth number is driven by low base (the economy had contracted by 7.6 per cent in FY21), and even after the growth, the actual size of the economy will be just at par with the one in pre-COVID times.

The rise in oil prices is one of the biggest factors feeding the inflation, it said, pointing out that RBI has been urging the government to reduce the taxes and duties on the commodity which lead to inflationary pressures.