India's GDP growth expected to be 8.8-9%, agriculture and industry main drivers

The gross domestic product (GDP) growth for FY22 is likely to be 8.8 to 9%, Care Ratings said in a report. The growth will be driven by the agriculture and industry sectors.

“GDP growth for the year (FY22) is expected to be 8.8-9% with GVA (gross value added) growth of 7.8%. The main drivers of the economy would be agriculture and industry,” as per Care Ratings’ economic outlook for 2021-22.

The second wave of Covid-19 and lockdown restrictions had deeply affected sectors like hotels and restaurants, tourism, retail malls, and entertainment. Hence the services sector will not be able to reach its full potential, even at 8.2 % growth. The Care report pointed out that the demand side is still facing challenges as the government and RBI are working to mitigate the supply chain issues.

With the monsoon around, the spending pattern of the rural households will play a critical role in economic growth. The could be some increase in the demand from urban India, not exceeding the levels attained in the last year.

“Higher consumption should stimulate investments. The crux will be an investment which has a multiplier effect on demand and investment,” it said.

The fiscal deficit for FY22 is projected between Rs 17.38 lakh crore to Rs 17.68 lakh crore, as per the report.

“For a nominal GDP of Rs 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.

It also said the cost of services has increased across all components, which combined with the fuel-led impact would keep CPI (consumer price index-based inflation) elevated at around 6% by March-end.

Due to the low base effect as well as rising global commodity prices, the wholesale price index-based inflation will be in double digits.

The report further said FPI flows to the country would be lower than last year and be in the region of $18-22 billion.