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India headed for high growth path as all eyes on Union Budget

All eyes on Finance Minister Nirmala Sitharaman

India's gross domestic product (GDP) is set to grow by double digits in 2021-22 after a sharp contraction in the current financial year. As several pundits pointed out that this sharp turnaround in the growth figure would be aided by a low base this year, they said that the projected growth rate of over 6 per cent in the following financial year (2022-23)  is remarkable considering it will be on the back of a high base.

Analysts said that the early implementation of the Covid 19 vaccine drive has been one of the biggest drivers of sentiment. 

“Even as we are expecting to clock 11 per cent growth rate in 2021-22, this is due to a very low base effect. But the real economic expansion would be felt in 2022-23. Importantly, a 6.8 per cent growth rate projected by the Economic Survey is encouraging and this suggests the real turnaround,” Nirupama Soundararajan, senior fellow and head of research, Pahle India Foundation (PIF) told Indianarrative.com.

The International Monetary Fund in its World Economic Outlook released on Friday pegged India’s growth rate at 11.5 per cent in 2021 and 6.8 per cent in 2022. This would make India the fastest growing economy in the world in the aftermath of the Covid-19 pandemic.

Narendra Taneja, economist and BJP spokesperson added that the reform measures that have been undertaken will start to bear fruit in the coming months. The effects of the stimulus package will also yield benefits in the new financial year, he said.

“Several reform measures have been announced along with the stimulus package to boost growth, the effects of these measures take time to show. The benefits would be visible in the coming months and this will go a long way in helping India realise its true growth potential,” Taneja said.

Industry experts also said that companies could restart their investment plans in the coming financial year.

While one of the major challenges for the Narendra Modi government would be to garner revenue amid constricted fiscal space, sources said that the disinvestment exercise, which until now has not been a success story, would be taken up on priority. Infrastructure, rural and agriculture sectors are set to het a huge push in the Union Budget to be announced on Monday.

These sectors are critical to push growth and generate jobs.

Modi and his team are also hoping to attract new investments—both foreign and domestic as the reform measures start to show results on the ground. 

The Confederation of Indian Industry noted that the advance estimate for the full year pegging the contraction in GDP at 7.7 per cent indicates a “shallower decline than earlier expected.”