Ind-Ra revises GDP growth projection to 9.4% in FY22 and 15.3% in Q1

In June, the rating agency had said that the GDP would grow by 9.6 per cent if the country is able to vaccinate its entire adult population by December 31 this year

India Ratings has revised its projections for economic growth during the current financial year to 9.4 per cent against its earlier forecast of 9.1-9.6 per cent. It would be 15.3 per cent in the first quarter, 8.3 per cent in the second quarter and 7.8 per cent in each of the remaining two quarters of the year.  

In June, the rating agency had said that the gross domestic product (GDP) would grow by 9.6 per cent if the country is able to vaccinate its entire adult population by December 31 this year, but economic expansion might slip to 9.1 per cent if that could not be done.

"Going by the pace of vaccination, it is now almost certain that India will not be able to vaccinate its entire adult population by December 31 this year," India Ratings' Chief Economist Devendra Pant said.

The agency’s estimate suggests that 5.2 million daily doses would have to be administered from now on to fully vaccinate more than 88 per cent of the adult population as well as to administer single doses to the rest by March in the current financial year.

Even then, the growth is now not projected to fall to 9.1 per cent as was expected earlier because there are certain positive developments in the economy, its principal economist Sunil Kumar Sinha said.

He said with the ebbing of Covid 2.0, several high frequency indicators are showing a faster rebound than expected, kharif sowing is indicating a significant pick-up with the revival of south-west monsoon and exports volume and growth showed a surprise turnaround in the first quarter of the current financial year.

The growth projected now is sharply lower than 10.1 per cent projected in April. Sinha said nobody could anticipate the spread of Covid 2.0 in April.

He said the gross domestic product during the current financial year will be 10.9 per cent lower than the trend value.

Sinha said of the four demand-side growth drivers -- private final consumption expenditure (PFCE), government final consumption expenditure (GFCE), gross fixed capital formation (GFCF) and exports -- only GFCE has shown somewhat decent growth, averaging 5.7 per cent during FY'19-FY'21. PFCE, GFCF and exports during this period grew 1.3 per cent, 1.5 per cent and 1.5 per cent, respectively.

Of the demand-side drivers, PFCE, proxy for consumption demand, is the largest component accounting for 58.6 per cent of the GDP in FY21, followed by GFCF accounting for 27.1 per cent, exports 18.1 per cent and GFCE 12.5 per cent, he said.