The National Statistical Office’s first advance estimates for economic output in the current financial year is an optimistic forecast that flags some positive trends as well as areas of concern that have the potential to derail the growth momentum. The NSO has projected real GDP for the 12 months ending March 2022 at ₹147.54 lakh-crore, a 9.2% expansion from the provisional estimate of ₹135.13 lakh-crore for the last fiscal year, when the full fury of the COVID-19 pandemic had caused output to contract by 7.3%. At that pace, India’s economy would regain its pre-eminence as the world’s fastest growing major economy. A key pillar of this growth assumption is the upbeat outlook for net tax receipts on products, which the NSO sees expanding by a robust 16.2%, after shrinking by 18.4% in the preceding period. Gross Value Added, which aggregates output in the various sectors of the economy, is projected to grow by 8.6% year-on-year on the back of a continued healthy showing by the farm sector and a heartening double digit (12.5%) rebound in manufacturing. However, when compared with the pre-pandemic FY2020’s GVA, the projected output of ₹135.2 lakh-crore is barely ₹2.5 lakh-crore, or 1.9%, higher, clearly pointing to the fact that the economy has a fair distance to travel before it can regain the growth momentum that is crucially required to create more jobs and help narrow the widening income inequality.
Tellingly, the NSO’s forecast, which relies on varied data spanning the first six to eight months of the current fiscal, has not factored in the impact of the ongoing Omicron-induced surge in COVID-19 cases. After all, it is anyone’s guess as to how much of a blow the current wave may deal to already fragile supply chains, consumption demand and contact-intensive services. In fact, private final consumption expenditure, which two years ago accounted for close to 60% of GDP, is still struggling to recover from the crushing compression it suffered in the first full year of the pandemic, when it shrank 9.1%. While the NSO posits consumer spending to grow by 6.9% this fiscal, the assumed figure is still a sizeable 2.9% shy of the FY2020 level. Equally significantly, the omnibus services category that spans trade, hotels, transport, communication and broadcasting and makes up a fifth of the GVA is estimated to post a mere 11.9% expansion after shrinking by 18.2% last fiscal. As a result, even without factoring in the impact of a third wave, this vital services sector would still be lagging behind its pre-pandemic output by 8.5%. With the Union Budget barely a few weeks away, policymakers have a clear choice to make: introduce consumption and investment supportive measures, even if it means loosening the fiscal purse strings, or risk seeing the growth momentum faltering for want of a fair wind.
Published - January 10, 2022 12:02 am IST
