The economy will grow between 8 and 11.5 per cent at constant prices and at 11-15.5 per cent at current prices during 2021-22, say economists.
It is gross domestic product (GDP) growth or economic expansion at current prices that plays a crucial part in Budget making. It is on the basis of this number that tax figures and fiscal deficits are projected.
As the economy is expected to decline 7.7 per cent in the current fiscal year, D K Srivastava, chief policy advisor, EY India, has pegged GDP growth at constant prices at 8 per cent in 2021-22. He projected nominal GDP to be 11-11.5 per cent.
He said there would be very strong recovery next fiscal year largely due to the base effect.
He said manufacturing, which was projected to decline by 9.4 per cent in the current financial year by advance estimates, would do better. Also construction will do well, he said.
Within services, financial, real estate and professional services are expected to perform well, he said. This sector was projected to fall 0.8 per cent in 2020-21.
On the other hand, trade, hotels, transport, communication and services related to broadcasting are likely to witness continued contraction, Srivastava said.
However, the rate of construction may fall compared to the 21.4 per cent decline expected this financial year by official estimates, he said.
Government-induced public administration, defence, and other services are likely to grow 8 per cent in the next financial year compared to a fall of 3.7 per cent projected this financial year by advance estimates.
Soumya Kanti Ghosh, State Bank of India group chief economic advisor, estimated real GDP growth at 10-11 per cent and nominal GDP growth rate at 14-15 per cent. He said nominal GDP would be more or less the same as was assumed for 2020-21 in the Budget, presented in February last year.
The Budget had assumed nominal GDP at Rs 224.89 trillion for the current fiscal year, but advance estimates have now pegged it way down at Rs 194 trillion.
CRISIL Chief Economist D K Joshi says the real GDP growth rate would be 10 per cent and the nominal one 14 per cent in the next fiscal year. He said depending on the stimulus provided in the Budget and spread of the pandemic, one may have to adjust and readjust numbers.
“Nothing is cast in stone,” he said.
ICRA Principal Economist Aditi Nayar estimated the real GDP growth rate at 9.5-10.5 and nominal GDP growth rate at 13.5-14.5 per cent.
Vivek Kumar, economist at QuantEco Research, projected GDP at constant prices to grow 11.5 per cent and at current prices by 15.5 per cent during 2021-22.
He said it would be primarily due to the base effect but there will be some recovery. After the vaccine is rolled out in the next few months and it reaches a critical number, there will be a positive impact on sentiment on both the consumer and business fronts, he said.
Kumar said improved consumer sentiment would lead to demand generation, which was lacking in the current fiscal year. This would also have repercussions on business sentiment and investment, he said.
He expects fiscal and monetary policies to support economic growth in 2021-22.