India's GDP to grow 11% in FY22, contract 8% in FY21, says CRISIL

CRISIL has projected India’s economy to grow by 11 per cent in the next fiscal year against expected contraction of 8 per cent in 2020-21, but GDP will still tread below the pre-Covid trend. It also said next year would be a story of two halves with broad-based recovery to come in the second half.
 
“While the first half of next fiscal year will benefit optically because of low-base effect, the second half would see a more broad-based pick-up in economic activity owing to a commodity price lift, large-scale vaccinations and likely stronger global growth,” it said.
 
GDP is likely to touch the pre-pandemic level only by the second quarter of fiscal year 2022, it said. By the end of fiscal 2021-22, GDP will only be about 2 per cent higher than fiscal year 2019-2020 level and 10 per cent below its pre-pandemic trend level.

 

The rating and research agency said India’s GDP growth will average to 6.3 per cent between 2022-23 and 2024-2025, which would be higher than the average of 5.8 per cent in the previous three years. The pace of growth would be lower than the 6.7 per cent seen in the decade preceding the pandemic, CRISIL said.
 
“Despite the growth, the Indian economy will suffer a permanent loss of 11 per cent of GDP in real terms over fiscal years 2022-2025,” CRISIL said.
 
Next financial year, the economy would see convergence of four drivers — people learning to live with the new normal; flattening of the Covid-19 affliction curve; roll-out of vaccines, and investment-focused government spending.

 
The expectation that a stretched fiscal deficit glide path, and the additional fiscal space of Rs 20-25 trillion over the next five years will be used for capital expenditure, is seen driving the growth. A promising set of reforms, deleveraging by corporates over the past few years, improving the appetite for investment, more support from global GDP, and trade growth are also seen aiding growth.
 
However, the recovery won’t be easy as the pandemic has scarred the small businesses, and urban poor deeper, it said. While exports are recovering well for large industries, and agriculture and allied sectors, labour-intensive, small-enterprise driven segments such as gems and jewellery, garments, and leather products remain weak due to their discretionary nature, the rating agency said.