ICRA revises FY22 GDP growth forecast to 9%

Rating agency ICRA on Monday revised its 2021-22 real GDP growth forecast for India to 9 per cent from 8.5 per cent earlier.

The ramp-up in COVID-19 vaccination, healthy advance estimates of the kharif (summer) crop and faster government spending were the factors that led to the revision, the agency said in a statement.

It may be noted that after a contraction of 7.3 per cent in 2020-21, higher growth numbers were expected in 2021-22. However, the second wave of COVID-19 infections at the start of the financial year, which also spread to the hinterland, made analysts more cautious. RBI expects the economy to grow at 9.5 per cent.

Icra said on Monday that it expects better prospects in the second half of the financial year.

Its Chief Economist Aditi Nayar said, “Comprehensive coverage of COVID-19 vaccines is expected to boost confidence, which will re-energize demand for contact-intensive services, thereby helping revive the part of the economy most affected by the pandemic.” Will get it.”

He said a strong kharif crop is likely to sustain consumption demand from the agriculture sector, while the expected pick-up in central government spending after the withdrawal of earlier cash management guidelines will recharge this key driver of aggregate demand, he added.

The major risk to the revised estimate of 9 per cent GDP growth is a possible third wave and that existing vaccines are ineffective against new mutations of the virus, she said.

ICRA estimates that nearly three-quarters of Indian adults could receive their second vaccine by the end of 2021 if the average 7.9 million doses recorded daily between September 1-26 are maintained.

Nair said that late sowing has helped bring the area under Kharif to the record area of ​​last year. In line with this, the first advance estimates of crop production for 2021-22 indicated strong growth in kharif production, excluding coarse cereals and oilseeds, allaying concerns raised by episodes of uneven monsoon and floods.

Based on these, the agency has revised its GVA (Gross Value Added) growth forecast for agriculture, forestry and fishing to 3 per cent in the second and third quarters of 2021-22 from the earlier estimate of 2 per cent. was from. she added.

The Centre’s spending declined by 4.7 per cent year-on-year in April-July 2021, and was 28.8 per cent of the budget estimates for 2021-22, the agency said, adding that a higher government spending to spur growth in the second half of the year. have hope. .

However, it said the trends in the industrial sector remain weak in September 2021, due to non-availability of semi-conductors, burden on auto production and exclusion of GST e-way bills.

In addition, heavy rains have reduced power demand and are likely to distort trends in mining and construction.

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