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What is the current state of the Indian economy in 2022?

Current State of the Indian economy

India is the world’s fastest-growing major economy. It is expected to be one of the top three economic powers in the next 10-15 years, owing to its robust democracy and strong partnerships.

What is the current state of the Indian economy in 2022?

The National Statistical Office (NSO) released the first advance estimates of National Income for 2021-22 on Friday to assist the Union Finance Ministry in developing its annual budget. Nirmala Sitharaman, Finance Minister, will present the Union Budget on February 1 at 11 a.m.

According to the autonomous body’s estimates compiled using the Benchmark-Indicator method, GDP may grow at a 9.2 percent annual rate in the fiscal year ending March 2022. It is slightly lower than the RBI’s 9.5 percent GDP growth projection for the fiscal year. Meanwhile, China is expected to grow at an annual rate of 8%.

According to estimates, the economy can return to FY20 levels in the absence of any strict lockdowns. However, the absolute growth rate in real GDP over FY20 would be 1.3 percent. This means that the pandemic cost the economy two years of growth.

Nominal GDP is expected to grow at a rate of 17.6 percent in FY22 after falling by 3 percent in FY21. It is higher than the 14.4 percent growth rate used in the FY22 Budget calculations in February.

Indian economy: India to be fastest growing economy in 2022, TRIPS waiver  necessary for vax: UNCTAD - The Economic TimesIt means that when the annual fiscal deficit is compared to nominal GDP, the government will benefit from a larger denominator. A higher nominal GDP growth rate than budgeted will have a dampening effect on the fiscal deficit as a percentage of GDP.

Assuming that all revenues remain unchanged from the previous Union Budget, the government can exceed its absolute deficit target by Rs 71,000 crore while maintaining its fiscal deficit target of 6.8 percent GDP.

There is growing agreement that fiscal stimulus is required for an economic recovery. Gross Value Added (GVA) figures released on Monday show a contraction in the sub-sector of public administration, defence, and other services. According to the ministry of finance’s Central Government Account (CGA) figures, the centre spent more on both revenue and capital expenditure categories between April and July than it did the previous year. 

This means that the decrease in spending had to come from the states. Given the state’s financial crisis, things could get worse. The states will face a Rs 2.35 lakh crore shortfall in GST compensation cess payments. They will also suffer due to a decrease in other central taxes. 

Indian Economy: Can All the King's Men Put it Together Again? | NewsClickThe sequential recovery should not give the impression that the economy has recovered from the disruption caused by Covid-19. In the week ending August 30, the Nomura India Business Resumption Index (NIBRI) was reported at 75.7. This is better than before, but the most recent figures are 24 percentage points lower than pre-pandemic levels, compared to a 31 percentage point deficit in July. 

According to the report, “recovery is uneven, and recurring weakness in the labour market highlights the fragility of household demand.” It also attributes some of the recoveries to pent-up demand following the lockdown. Finally, all of this is contingent on the government raising an estimated Rs 1 lakh crore through the LIC IPO.

Manufacturing is expected to grow at a 12.5 percent annual rate, while construction is expected to grow at a 10.7 percent annual rate. Despite a high of 11.9 percent this year, trade, hotel, transportation, and communication have not made up for output lost since FY20.

The bad news is that private consumption is declining. Its GDP share is still lower than it was two years ago. Consumer spending is expected to account for 54.8 percent of GDP in FY22, up from 56 percent in FY21 and 57.1 percent in FY20.

In absolute terms, it is expected to rise 6.9 percent, but it will remain lower than pre-Covid levels seen in FY20. This suggests that despite a strong recovery in

While these figures paint a positive picture of the economy’s recovery, the impact of restrictions imposed due to the rising coronavirus caseload will be more precise by the end of the month. That is the date when the first revised GDP estimate for FY21 will be released. The release of the second advance estimates of GDP for FY22 on February 28 may result in revisions to growth rates as well.

Indian Economy Heading Towards V-Shaped Recovery in 2021: AssochamIndia has made notable progress in reducing absolute poverty since the 2000s. More than 90 million people were lifted out of extreme poverty between 2011 and 2015.

Despite well-crafted fiscal and monetary policy support, the COVID-19 pandemic caused India’s economy to contract by 7.3 percent in FY21. Following the deadly second wave,’ growth in FY22 is expected to be closer to the lower bound of the 7.5 to 12.5 percent range, keeping India among the world’s fastest-growing economies.

The increasing rate of vaccination will determine economic prospects for this year and beyond. Agriculture and labour reforms that are successfully implemented would boost medium-term growth, whereas weakened household and corporate balance sheets could limit it.

The government’s response to the COVID-19 outbreak has been swift and comprehensive. A national lockdown to contain the health emergency was accompanied by a comprehensive policy package aimed at mitigating the impact on the poorest households (via various social protection measures) as well as small and medium-sized businesses (through enhanced liquidity and financial support).

To rebuild better, India must maintain its focus on reducing inequality while implementing growth-oriented reforms to get the economy back on track. The World Bank is collaborating with the government in this effort by assisting in the strengthening of policies, institutions, and investments to create a better future for the country and its people through green, resilient, and inclusive development.

The government and the Reserve Bank of India implemented several monetary and fiscal policy measures in response to the Covid-19 shock to assist vulnerable firms and households, expand service delivery (including increased spending on health and social protection), and mitigate the economic impact of the crisis. The economy is expected to rebound, thanks in part to these proactive measures, with a strong base effect materializing in FY22 and growth stabilizing at around 7% thereafter.

Edited by Prakriti Arora

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