Economic Survey: Govt sees scope for retaining world-beating economy tag

India has the fiscal space to do more to support the economy, poised to wrest the title of the world’s fastest-growing major one from China and keep it for at least another two years, according to a government document.

Gross domestic product is expected to grow by 8%-8.5% in the year starting April after likely expanding 9.2% in the current year, according to the Economic Survey -- an annual report card on the economy -- presented in Parliament by Finance Minister Nirmala Sitharaman Monday. The International Monetary Fund predicts it will keep the momentum in the following year as well.

Growth will be supported by “widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending,” the survey said. 

The survey expectations for the next fiscal year are conservative compared to the 9% expansion seen by IMF. The government document was unveiled a day ahead of Sitharaman presenting the nation’s federal budget for the next fiscal year when she’s expected to announce plans to boost spending to revive investment and create jobs.

“The projection is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be orderly,” according to the survey. It also depends on oil price being in the range of $70-$75 a barrel and global supply chain disruptions easing.

Prime Minister Narendra Modi’s administration is under pressure to support growth as the central bank, which has thus far done much of the heavy-lifting to support the economy, begins dialing back some of its pandemic-era stimulus.

"This (growth) projection is based on the assumption that there will be no further debilitating pandemic-related economic disruption," said Sanjeev Sanyal, principal economic adviser at the finance ministry and the lead author of the report.

The growth projections also assumed a normal rainfall and an orderly withdrawal of global liquidity by major central banks, the report said.

India's economy has been on the mend after the government lifted mobility measures in June to curb the spread of coronavirus, after contracting 7.3% in the previous fiscal year.

The annual report, which presents a report card of India's economic achievements and provides new estimates, has often missed targets.

Last year, it forecast annual economic growth of 11%, that was later revised down by the Ministry of Statistics to 9.2%, after economic activity was hit hard by the Omicron variant.