India's GDP growth expected to be 8.8-9% in FY22: Care Ratings

India’s gross domestic product (GDP) growth is likely to be 8.8 to 9 per cent in this fiscal, driven by agriculture and industry sectors, according to a report by Care Ratings, which recently said the outlook for the economy on almost all counts in fiscal 2021-22 would look seemingly better than the last on account of the negative base effect.

The country's economy had contracted by 7.3 per cent in the last fiscal.

"GDP growth for the year (FY22) is expected to be 8.8-9 per cent with GVA (gross value added) growth of 7.8 per cent. The main drivers of the economy would be agriculture and industry," the ratings agency said in its Economic Outlook for 2021-22.

Services sector will not be able to reach its potential even at 8.2 per cent growth as the second lockdown has affected sectors like hotels and restaurants, tourism, retail malls and entertainment in particular, the organisation was quoted as saying by a news agency.
While a lot has been done on the supply side by both the Reserve Bank of India and the government, the malaise is on the demand side which has been a problem even before the pandemic, Care Ratings pointed out.
A critical factor this time will be the spending pattern of the rural households, the report said, adding that the monsoon forecast is good and ideally a stable Kharif harvest should bode well for rural incomes.
There could be some pent up demand which surfaces this time too from urban India, but it may just about maintain the level of last year and not really be a breakthrough.
"Higher consumption should stimulate investments. The crux will be an investment which has a multiplier effect on demand and investment," it said.
The report also said the fiscal deficit for fiscal 2021-22 is projected between ₹17.38 lakh crore to ₹17.68 lakh crore.
"For a nominal GDP of ₹222.9 lakh crore, the increase in quantum of fiscal deficit would potentially push up the fiscal deficit ratio to 7.8-7.9 per cent of GDP," the report said.
"Given the high inflation numbers witnessed so far and our expectation of CPI inflation to remain elevated, it does not look likely that there can be any rate cut at least in the 2021 calendar year," the organisation said.
It also expects the non-performing assets (NPAs) of banks to be at 10-10.5 per cent for March 2022. The current account will turn into a deficit this year with a higher trade deficit and stable invisible flows, it said.
It estimates the country's foreign exchange reserves to be around USD 620-630 billion by March-end.