India's GDP to bounce back to 10.4% growth in FY22, says India Ratings

India Ratings and Research (Ind-Ra) estimates India’s gross domestic product (GDP) to bounce back to 10.4 per cent growth in FY22 driven by base effect, signalling that a meaningful recovery will not happen before FY23.

The rating agency expects GDP growth to turn positive at 0.3 per cent in the January-March quarter of FY21 after shrinking in first nine months of the year.

The YoY recovery in FY22 will be V-shaped, but the size of GDP will barely surpass the level attained in FY20 and will be 10.6 per cent lower than the trend value, the agency said.

“FY22 will be covering the lost ground of FY21,” said Sunil Kumar Sinha, principal economist at Ind-Ra.

“FY20 was a year of slowdown and FY21 was a year of lockdown for India. The worst is behind us with respect to Covid-19. However, till mass vaccination and herd immunity becomes reality, lingering impact on the economy would continue,” Sinha said.

The impact of the lockdown on the economy, although subsiding, will continue to delay the normalisation of economic activities in the contact-intensive sectors, the agency said in its note.

Ind-Ra expects the government’s final consumption expenditure to grow 10.1 per cent YoY in FY22 as the Union Budget has set aside fiscal conservatism to provide the much-needed support to the demand side of the economy.

The private final consumption expenditure is expected to grow 11.2 per cent in FY22.