GDP Growth Projected At 8.5% In 2021-22 With Gradual Unlocking: Rating Agency

The gross domestic product (GDP) for the financial year 2021-22 is projected to grow at 8.5 per cent year-on-year. while the gross value-added (GVA) at basic prices is projected at 7.3 per cent by credit rating agency ICRA. According to a statement shared by the agency, if the vaccine coverage in the country is accelerated with a recentralised procurement policy, the GDP expansion may rise to 9.5 per cent with a widening upside in the third and fourth quarters of the fiscal year. (Also Read: India One Of Few Economies To Witness Growth In 2 Consecutive Quarters: Report )

Aditi Nayar, Chief Economist at ICRA stated that the impact of the second wave of the COVID-19 pandemic and the state-wise lockdown restrictions were witnessed across a variety of high-frequency indicators in April and May. Now the rating agency has placed its baseline GDP growth forecast for the financial year 2021-22 at 8.5 per cent after the number of fresh cases moderated and mobility restrictions are eased.

For the full fiscal year, the agency predicts the GDP growth to exceed the gross value-added growth by 120 basis points, based upon the expectations related to the value of taxes on products as well as on the subsidies of the products.

The credit rating agency expects a prolonged negative impact of the second COVID-19 curve on consumer sentiment and the demand for healthcare as well as fuel expenses could impact disposable income. These factors could cause less pent-up or replacement demand in the current fiscal year, compared to fiscal 2020-21.

Even as the second wave of the pandemic has dampened the near-term outlook for the economy, vaccine optimism has resulted in rising global commodity prices. The firm expects subdued domestic demand to constrain the pricing power, squeezing margins in several sectors.