India’s Real GDP Likely To Maintain 9% Growth Rate In FY23: ICRA Report

The Indian economy grew at 8.4 per cent in the second quarter of the current fiscal, as against a growth of 20.1 per cent in the April-June quarter

According to ICRA, the visibility of tax revenue growth to spur faster government spending in 2022. Image: Getty

New Delhi: The country’s real gross domestic product (GDP) is likely to maintain a 9 per cent growth rate in FY22 and FY23, amid concerns over the Omicron variant of Covid-19, says a report.

The Indian economy grew at 8.4 per cent in the second quarter of the current fiscal, as against a growth of 20.1 per cent in the April-June quarter.

“We are maintaining our forecast of a 9 per cent GDP expansion in FY22, with a clear K-shaped divergence amongst the formal and informal parts of the economy, and the large gaining at the cost of the small. Looking ahead, we expect the economy to maintain a similar 9 per cent growth in FY23,” domestic rating agency ICRA Chief Economist Aditi Nayar said in the report. She expects the percentage of double-vaccinated adults to rise to 85-90 per cent by March 2022.

While the announcement of booster doses and vaccines for the 15-18 age group is welcome, it remains to be seen whether all the existing vaccines would offer adequate protection against the new Omicron variant to avert a third wave in India, Nayar said.

In any case, fresh restrictions being introduced by several states to curb the spread of Covid may temporarily interrupt the economic recovery, especially in the contact-intensive sectors in Q4 FY22, she added.

Nayar, however, expects the expansion in FY23 to be more meaningful and tangible than the base effect-led rise in FY22.

“Based on our assumptions of the GDP growth, if the Covid-19 pandemic had not emerged vs. the actual shrinkage that occurred in FY21 and the expected recovery in the next two years, the net loss to the Indian economy from the pandemic during FY21-23 is estimated at Rs 39.3 lakh crore, in real terms,” she said.

The available data for Q3FY22 does not offer convincing evidence that the Monetary Policy Committee's (MPC's) criteria of a durable and sustainable growth recovery has been met, to confirm a change in the Monetary Policy stance to neutral in February 2022, the rating agency said.

It believes that rising consumption will push capacity utilisation above the crucial threshold of 75 per cent by the end of 2022, which should then trigger a broad-based pick-up in private sector investment activity in 2023.

The agency also expects the visibility of tax revenue growth to spur faster government spending in 2022.