India is set to regain its position as the world’s fastest-growing major economy this year, but any euphoria is likely to be tempered by concerns over a resurgent coronavirus outbreak.
Gross domestic product will grow 9.2 percent in the fiscal year ending March 2022, the first official estimate released by the Statistics Ministry on Friday shows. That is slightly slower than the 9.5 percent expansion forecast by the Reserve Bank of India as well as economists surveyed by Bloomberg.
With one quarter still left in the fiscal year and parts of the economy already facing fresh curbs to stem the Omicron variant, the estimate is likely to undergo revisions.
The uncertainty spawned by the pandemic has so far kept fiscal and monetary policies accommodative to aid a durable recovery, even as global peers have begun dialling back stimulus measures to combat inflation.
A sustained pace of growth is key to attracting investors to India, which is in the middle of a massive privatisation drive, besides boosting manufacturing and creating jobs.
“We do have pockets of revenge demand coming in spurts but consumption still needs some hand-holding,” said Shubhada Rao, founder of QuantEco Research in Mumbai, who reckons that the impact of India’s third virus wave may have been factored in these estimates.
“We are looking at 7.5 percent growth next year.”
If the 9.2 percent growth is realised it would be the fastest growth since 1988-89 when the economy expanded by 9.6 percent. Under the new methodology, data for which is available for 17 years, it would be the fastest expansion.
The nominal GDP (including inflation) is estimated at 17.6 percent. The size of the economy based on current prices in dollar terms is estimated to be $3.1 trillion.
Economists, however, see a downward bias to the growth estimates, as the data may not fully capture the impact of the ongoing third wave, a possibility acknowledged by the statistics office.
“The implicit GDP growth of 5.6 percent for H2 FY22 built-in by the NSO may not fully factor in the admittedly evolving impact of Omicron,” said Aditi Nayar, chief economist, ICRA. “Our sense is that after a 6-6.5% rise in Q3 FY22, the GDP expansion is set to slip below 5% in the ongoing quarter.”
HDFC Bank expects the GDP growth for FY22 to be between 9 percent and 9.5 percent .
Research and analytics firm IHS Markit said on Friday that India is likely to overtake Japan as Asia’s second-largest economy by 2030 when its GDP is also projected to surpass that of Germany and the UK to rank as world number 3. India’s nominal GDP is forecast to rise to $8.4 trillion by 2030, it said.