The Indian economy is expected to grow by 9.2% in the financial year 2021-22, according to the Economic Survey 2021-22, which was presented by Finance Minister Nirmala Sitharaman in Parliament today. The survey observed that the economic impact of the second wave of Covid pandemic was substantially lower than that of the full lockdown phase in 2020-21.
Highlights of the Economic Survey
State of the economy
- The Indian economy is estimated to grow by 9.2% in real terms in 2021-22 (as per first advanced estimates) after a contraction of 7.3% in 2020-21.
- GDP is projected to grow by 8-8.5% in real terms in 2022-23.
- The year ahead is poised for a pickup in private sector investment with the financial system in a good position to provide support for the economy’s revival.
- Projection is comparable with World Bank and Asian Development Bank’s latest forecasts of real GDP growth of 8.7% and 7.5% respectively for 2022-23.
- As per IMF’s latest World Economic Outlook projections, India’s real GDP is projected to grow at 9% in 2021-22 and 2022-23 and 7.1% in 2023-2024, which would make India the fastest-growing major economy in the world for all three years.
- Agriculture and allied sectors are expected to grow by 3.9%, industry by 11.8% and the services sector by 8.2% in 2021-22.
- On demand side, consumption is estimated to grow by 7.0 %, Gross Fixed Capital Formation (GFCF) by 15%, exports by 16.5% and imports by 29.4% in 2021-22.
- Macroeconomic stability indicators suggest that the Indian economy is well placed to take on the challenges of 2022-23.
- A combination of high foreign exchange reserves, sustained foreign direct investment, and rising export earnings will provide an adequate buffer against possible global liquidity tapering in 2022-23.
- Government of India’s unique response comprised of safety nets to cushion the impact on vulnerable sections of society and the business sector, significant increase in capital expenditure to spur growth and supply-side reforms for a sustained long-term expansion.
- The government’s flexible and multi-layered response is partly based on an “Agile” framework that uses feedback-loops, and the use of eighty High-Frequency Indicators (HFIs) in an environment of extreme uncertainty.
Fiscal Developments
- The revenue receipts from the Central Government (April to November 2021) have gone up by 67.2% (YoY) as against expected growth of 9.6% in the 2021-22 budget estimates (over 2020-21 provisional actuals).
- Gross tax revenue registers a growth of over 50% from April to November, 2021 in YoY terms. This performance is strong compared to even pre-pandemic levels of 2019-2020.
- During April-November 2021, Capex has grown by 13.5% (YoY) with a focus on infrastructure-intensive sectors.
- Sustained revenue collection and a targeted expenditure policy have contained the fiscal deficit for April to November 2021 at 46.2% of BE.
- With the enhanced borrowings on account of Covid-19, the central government debt has gone up from 49.1% of GDP in 2019-20 to 59.3% of GDP in 2020-21, but is expected to follow a declining trajectory with the recovery of the economy.
External sectors
- India’s merchandise exports and imports rebounded strongly and surpassed pre-Covid levels during the current financial year.
- There was a significant pickup in net services with both receipts and payments crossing the pre-pandemic levels, despite weak tourism revenues.
- Net capital flows were higher at $65.6 billion in the first half of 2021-22, on account of continued inflow of foreign investment, revival in net external commercial borrowings, higher banking capital and additional special drawing rights (SDR) allocation.
- India’s external debt rose to $593.1 billion at the end of September 2021, from $556.8 billion a year earlier, reflecting additional SDR allocation by IMF, coupled with higher commercial borrowings.
- Foreign exchange reserves crossed $600 billion in the first half of 2021-22 and touched $ 633.6 billion as of December 31, 2021.
- As of end-November 2021, India was the fourth largest forex reserves holder in the world after China, Japan and Switzerland.
Fiscal management
- The liquidity in the system remained in surplus.
- Repo rate was maintained at 4% in 2021-22.
- The RBI undertook various measures such as G-Sec Acquisition Programme and Special Long-Term Repo Operations to provide further liquidity.
- YoY Bank credit growth accelerated gradually in 2021-22 from 5.3% in April 2021 to 9.2% as of 31 December 2021.
- The gross non-performing advances ratio of scheduled Commercial Banks (SCBs) declined from 11.2% at the end of 2017-18 to 6.9% at the end of September, 2021.
- Net non-performing advances ratio declined from 6% to 2.2% during the same period.
- The capital to risk-weighted asset ratio of SCBs continued to increase from 13% in 2013-14 to 16.54% at the end of September 2021.
- The return on assets and return on equity for public sector banks continued to be positive for the period ending September 2021.
Exceptional year for the capital markets
- Rs. 89,066 crore was raised via 75 IPOs in April-November 2021, which is much higher than in any year in the last decade.
- Sensex and Nifty scaled up to a touch peak at 61,766 and 18,477 on October 18, 2021.
- Among major emerging market economies, Indian markets outperformed peers in April-December 2021.
