Economic Survey 2021-22: Govt projects 8-8.5% growth in FY23

Finance Minister Nirmala Sitharaman tabled the Economic Survey 2021-22 in the Lok Sabha today. This comes ahead of the Budget announcements on February 1, scheduled to begin from 11am. The survey that details the state of the economy ahead of the Union Budget, projected an 8-8.5 per cent growth rate for the Indian economy in fiscal year 2022-23. 

“With the vaccination programme having covered the bulk of the population, economic momentum building back and the likely long-term benefits of supply-side reforms in the pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5 per cent in 2022-23,” stated the report.

The report quoted advance estimates that suggested that the real GDP will expand 9.2 per cent in 2021-22, after contracting in 2020-21. “This implies that overall economic activity has recovered past the pre-pandemic levels. Almost all indicators show that the economic impact of the ‘second wave’ in Q1 was much smaller than that experienced during the full lockdown phase in 2020-21 even though the health impact was more severe,” it said. 

The Economic Survey added that the projection is based on the assumption that there will be no further debilitating pandemic-related economic disruption, normal monsoon, orderly withdrawal of global liquidity by major central banks, oil prices in the range of $70-$75/bbl, and easing of global supply chain disruptions over the course of the year. 

The report added that agriculture and allied sectors were the least impacted by the pandemic and the sector is expected to grow 3.9 per cent in 2021-22 after growing 3.6 per cent in the previous year. GVA of industry will rise by 11.8 per cent in 2021-22 after contracting 7 per cent in 2020-21, the survey stated quoting advance estimates. 

“The Services sector has been the hardest hit by the pandemic, especially segments that involve human contact. This sector is estimated to grow by 8.2 per cent this financial year following last year’s 8.4 per cent contraction,” as mentioned in the Economic Survey 2021-22. 

Total consumption is estimated to grow 7 per cent in 2021-22, with a push from government spending. Gross Fixed Capital Formation exceeded pre-pandemic levels due to increased public expenditure on infrastructure. 

Goods and services exports have been exceptionally strong in 2021-22 so far. Imports recovered too due to increased demand. 

The Economic Survey, however, put a word of caution and stated that the global environment remains uncertain still. The new Omicron variant, increased inflation in most countries, and withdrawal of the cycle of liquidity was being initiated by major central banks in the time of writing the report.

“Despite all the disruptions caused by the global pandemic, India’s balance of payments remained in surplus throughout the last two years. This allowed the Reserve Bank of India to keep accumulating foreign exchange reserves (they stood at $634 billion on December 31, 2021). This is equivalent to 13.2 months of merchandise imports and is higher than the country’s external debt,” it added.

The report added that increased fiscal support to the economy caused fiscal deficit and government debt to rise in 2020-21. “However, a strong rebound in government revenues in 2021-22 has meant that the Government will comfortably meet its targets for the year while maintaining the support, and ramping up capital expenditure,” it said.

Indian capital markets have done exceptionally well, and the banking system is well capitalised. The overhang of Non-Performing Assets seems to have structurally declined, it said.

“Overall, macro-economic stability indicators suggest that the Indian economy is well placed to take on the challenges of 2022-23,” stated the Economic Survey. 

Supply-side reforms such as deregulation of numerous sectors, simplification of processes, removal of legacy issues like ‘retrospective tax’, privatisation, production-linked incentives highlight the emphasis on supply-side reforms rather than reliance on demand management, stated the survey.      

The Economic Survey 2021-22 looks into the supply-side issues to improve the Indian economy. It details the state of different sectors of the economy and reforms that should be taken subsequently to improve the growth of the economy. 

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