Survey sees expansionary fiscal policy, 11% growth

NEW DELHI: India’s GDP is projected to record a growth of 11% in 2021-22, while nominal GDP (excluding inflation) may expand 15.4% after the 7.7% pandemic-driven contraction in 2020-21, the Economic Survey said on Friday.
“These conservative estimates reflect upside potential that can manifest due to the continued normalisation in economic activities as the rollout of vaccines gathers traction.This will further be supported by supply-side push from reforms and easing of regulations, push to infrastructural investments, boost to manufacturing sector through the Productivity Linked Incentive schemes, recovery of pent-up demand for services sector, increase in discretionary consumption subsequent to roll-out of the vaccine and pick-up in credit, given adequate liquidity and low interest rates,” according to the survey.
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“This path would entail a growth in real GDP by 2.4% over the absolute level of 2019-20 — implying that the economy would take two years to reach and go past the pre-pandemic level. These projections are in line with IMF estimate of real GDP growth of 11.5% in 2021-22 for India and 6.8% in 2022-23. India is expected to emerge as the fastest growing economy in the next two years as per IMF.”

The survey said with the economy’s returning to normalcy brought closer by the initiation of a mega vaccination drive, hopes of a robust recovery in services sector, consumption, and investment have been rekindled. “India’s mature policy response to this ‘once-in-a-century’ crisis thus provides important lessons for democracies to avoid myopic policy-making,” according to the survey authored by chief economic adviser Krishnamurthy Subramanian.
The survey expects the government to pursue an expansionary fiscal policy to sustain recovery. “Based on trends available for April to November, there is likely to be a fiscal slippage during the year,” the survey said. It slammed ratings agencies, saying India’s sovereign ratings do not reflect its fundamentals. “India’s fiscal policy, therefore, must not remain beholden to a noisy/biased measure of India’s fundamentals and should instead reflect Gurudev Rabindranath Thakur’s sentiment of a mind without fear.”