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Economic Survey sees India’s GDP growth surging to 11% in 2021-222

India expected to post 11% growth in 2021-22: Economic Survey

India is expected to register a V-shaped economic recovery with a double digit 11 per cent growth rate in 2021-22 after a contraction of 7.7 per cent in 2020-21, the economic survey tabled in Parliament on Friday said.  For 2022-23 the survey has pegged the growth rate at 6.8 per cent.

The survey expects a sharp economic recovery as normalcy returns on the back of the country’s massive vaccination programme that has been initiated to fight the Covid-19 pandemic. It points out that India’s timely lockdown and brave preventive measures have helped in controlling the spread of the Covid 19 pandemic.

The growth prediction is in line with the International Monetary Fund forecast of a double digit economic growth of 11.5 per cent for India in 2021 and a 6.8 per cent expansion in 2022.

The survey—the official report card of the economy,—noted that India’s recovery was driven by rapid normalisation in economic activities, policy support besides pent-up demand.

“Learning from this experience, India implemented an early and stringent lockdown from late March to May to curb the pace of spread of Covid-19. With the economy brought to a standstill for two complete months, the inevitable effect was a 23.9 per cent contraction in GDP as compared to previous year's quarter," the survey, authored by chief economic adviser at the finance ministry K.V. Subramanian said.

Narendra Taneja, economist and BJP’s spokesperson said that consumption will drive growth in the new financial year. “Services sector has played a dominant role in India’s GDP and that is expected to get back on the growth path with the Covid 19 vaccination drive. “

Low  base also a factor

While the survey forecast a “V-shaped” economic recovery, it also cautioned that it would take at least two years to revert to pre-pandemic gross domestic levels.

Analysts said that while India is poised to clock a growth rate of 11 per cent in the new financial year, this would be primarily due to the base effect. This means that growth rate “seem” higher in the coming financial year due to abysmally low growth figures in the current financial year. The base effect implies a distortion in the figures, which could be too high or too low, often leading to difficulty in assessing the real situation.

Nirupama Soundararajan, senior fellow and head of research, Pahle India Foundation (PIF) told Indianarrative.com that the focus should be on job creation to ensure that growth. “The growth projection of 11 per cent is basically due to the base level of this year, so even if we have a double digit growth, in real terms, we may just be able to get back to the pre-Covid situation.  However, it is important to focus on the 6.8 per cent growth rate projected for 2022-23 as that would determine the real story,” Soudararajan said.

Revenue generation woes

The main problem is the source of revenue with fiscal slippages. The government may not have the required revenue to boost growth.

“The real problem is how do you raise revenue,” Soundararajan said.

Aggressive disinvestment, imposition of cess, taxing the super rich, raising import duties on certain items are a few avenues that are being looked at to generate revenue.

An insider said that a few profit making public sector undertakings could also be put up for disinvestment. Industry bodies said that disinvestment is one area, which needs more focus. “Disinvestment plan must be chalked out in a manner which yields the desired results,” an analyst on condition of anonymity said.

“To bring the improving growth trajectory on a firm footing and extend it to many more sectors, continuous support from the government is needed through the year 2021… This is not the time to be hemmed in by potential impact of an expansionary fiscal policy on sovereign ratings but walk the extra mile to meet the national requirements,” Uday Shankar, President, FICCI said in a statement. 

All indications point at India becoming the fastest growing economy in 2021

While experts said that the high growth rate could be due to base effect, there is no doubt that India is set to be the fastest growing economy in the world in 2021 and even in 2022. They said that the Union Budget must chalk out measures that push consumption.

“Many companies will now start looking at investments. From April 1, appetite for growth will be back as sentiments have already started going up,” Taneja said.