The World Bank's Global Economic Prospects Report kept its growth rate projections for the Indian economy that it made in June 2021 unchanged at 8.3℅ for FY 2021-22. It has also upgraded its projections for FY 2022-23 to 8.7℅ and 6.8℅ for 2023-24 citing higher investment from the private sector and in infrastructure, along with dividends from ongoing reforms. The World Bank report also credited the Government’s Production Linked Incentives (PLI) Scheme for the increased growth. Such a growth rate places India above other emerging markets and developing economies like China, Indonesia and Bangladesh which are expected to grow at 5.1℅, 5.2℅ and 6.4℅ respectively.
The PLI scheme consists of federal incentives worth 1.97 lakh across 14 key sectors such as telecom, electronics, auto parts, advanced batteries, pharmaceutical drugs, solar energy components and others, over a five-year period to boost indigenous production and exports by an estimated $520 billions.
However, the World Bank’s reports on global economic growth projection is less optimistic with growth dipping from 5.5℅ in 2021 to 4.1℅ in 2022 and 3.2℅ in 2023. It blames this “pronounced slowdown” on new variants of Covid-19, rising inflation, debt and income inequality, withering of monetary and fiscal support and pent-up demand.
The Central Government's National Statistics Office (NSO) estimates a growth rate of 9.2℅ for this financial year. The Reserve Bank of India also revised it growth rate to 9.5℅ for this year and the IMF has projected 9.5℅ for this fiscal year and 8℅ for the next one.
An article on the state of economy published in the RBI bulletin expressed optimism regarding economic activity. Upbeat consumer and business confidence, uptick in bank credit, resilient aggregate demand conditions, rapid vaccination and a “flash-flood rather than a wave” of a milder Omicron variant have brightened economic prospects going forward.
Former Chief Economic Advisor, Arvind Virmani also commented at a virtual event organised by industry body PHDCCI that the Indian economy will likely grow at 9.5℅ this financial year. He also said that this decade's average growth rate FY 2021-FY 2030 would be around 7.5℅ plus minus 0.5℅. However, he regretted that job growth is lagging despite positive GDP growth and stressed that Micro Small and Medium Enterprises are necessary to bring about inclusive growth.
According to the PwC Annual Global CEO Survey, 99 ℅ of CEO's in India believe that India's economic growth will improve over the next 12 months.
However, former Chief Economic Advisor to the UPA government, Kaushik Basu in an interview to PTI has expressed concerns that although, overall macroeconomic situation seems to recover, growth is largely concentrated at the top end. He also expressed concerns over rising inflationary trends and high youth unemployment rate of 23℅. He said that India is going through stagflation and carefully curated policy interventions are needed to tackle it effectively.
Retail inflation reached 5.59℅ in December of 2021 due to a sharp increase in food prices while the wholesale price-based inflation eased to 13.56℅ last month going against the rising trend of the previous 4 months.
HSBC Holdings Plc reported that India’s economic growth rate could be cut by about a quarter of a percentage point in this fiscal year due to renewed restrictions in response to rising Covid-19 cases. Economists at Citigroup Inc., India Ratings and Research Pvt. and ICICI Bank limited have also lowered their GDP growth rate projections before and after the third wave, from 9.8℅ to 9℅, 9.4℅ to 9.3℅ and 9.8℅ to 9.6℅ respectively.
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