PM’s Economic Advisory Council Predicts Real Rate GDP Growth To Hover Around 7.5% In FY23

The council members looked beyond FY21-22 as they were optimistic about real and nominal growth prospects in the next fiscal year

New Delhi: Members of the Economic Advisory Council to the Prime Minister (EAC-PM) met on Thursday in New Delhi and discussed the country’s growth prospect.  

The members looked beyond the current financial year (FY21-22) as they were optimistic about real and nominal growth prospects in the next fiscal year (FY22-23).

According to the statement issued by the council, other than an element of the base effect, the contact-intensive sectors and construction market should recover in FY22-23. Once capacity utilisation improves, private investments should also recover. Therefore, the members felt a real rate of growth of 7 per cent to 7.5 per cent and a nominal rate of growth of more than 11 per cent in FY22-23 was likely.

However, this should not mean that the Union Budget for FY 22-23 should project unrealistically high tax revenue or tax buoyancy numbers. The Union Budget for FY 21-22 was applauded because of reform measures, as well as transparency and realism in the numbers.

EAC-PM members were of the view that these dimensions should be carried forward into the FY22-23 Budget too, signalling use of the extra revenue in the form of capital expenditure and human capital expenditure, since the Covid-19 pandemic has led to a human capital deficit. There should also be a clear road map for privatisation and the growth orientation of last year’s Budget should also be maintained.

The Reserve Bank of India (RBI) in June this year had announced a slew of liquidity measures, including a Rs 15,000-crore liquidity window for contact-intensive sectors like hotels and tourism, a special liquidity facility of Rs 16,000 crore to SIDBI, securities purchases of Rs 40,000 crore and an increase in the coverage of borrowers under the resolution framework scheme by enhancing the maximum exposure limit from Rs 25 crore to Rs 50 crore for MSMEs, small businesses, and loans to individuals for business purposes.

Under the contact-intensive scheme, banks can provide fresh lending support to hotels and restaurants; tourism-travel agents, tour operators and adventure/heritage facilities, aviation ancillary services, ground handling, and supply chain, and other services that include private bus operators, car repair services, rent-a-car service providers, event organisers, spa, and beauty parlours, and saloons. These sectors were hit by the lockdowns amid the raging pandemic.