Durable Growth Revival

The recent growth recovery has been uneven as is visible across different sectors of the economy and different segments of the population. This unevenness is hurting the consumption of lower-income households and private investments, which are vital for sustained or durable growth.

India’s gross domestic product (GDP) is projected to grow at 9.2% in 2021–22, according to the first advance estimates released by the National Statistical Office (NSO). In 2020–21, after the nation-wide lockdown imposed by the outbreak of COVID-19, the GDP contracted by 7.3%. The NSO estimate is a little lower than the Reserve Bank of India’s (RBI) GDP projection in the December 2021 policy review, which had projected that the economy might grow at 9.5%. The RBI’s projections also showed that the growth rate for the third quarter (October–December 2021) and fourth quarter (January–March 2022) would be 6.6% and 6%, respectively. The real GDP growth rate was 8.4% in July–September 2021, after a sharp acceleration of 20.1% in April–June 2021. The implicit assumption in many of these projections is that there would be no resurgence of the pandemic on the scale of that in 2020–21. The spread of the Omicron variant of the virus has now cast shadow on some of these projections and in reality the year might end up with lower growth, particularly in the fourth quarter of the fiscal year (FY).

At the sectoral level, agriculture is growing at 3.9% in FY 2022 as against 3.6% growth in the FY 2021. Manufacturing sector is to register a turnaround, growing at 12.5% as against a 7.2% contraction in the last fiscal year. Electricity generation is estimated to grow at 8.5% as against 1.9% in FY 2021, trade, hotels, and transport services are projected to growth at 11.9%, which in 2020–21 had contracted sharply by 18.2%. In absolute terms, the services sector is still estimated to be below the pre-pandemic levels. Per capita net national income in real terms is estimated to be `1,06,975 in FY 2022, lower than `1,07,589 in FY 2020, suggesting that the average citizen is worse off worse off than two years back. Further, the change in stocks is expected to be at `1.67 lakh crore in FY 2022, higher than `1.54 lakh crore in FY 2021 and valuables as part of GDP is estimated to be `2.94 lakh crore in FY 2022 as against `1.67 lakh crore in FY 2021.