There has been recovery of the Indian economy in the past month. The daily new Covid 19 cases have gone down some more to around 30,000 and even below on certain days. This is coupled with staggering coverage on vaccination across the country. Considering the vast population of the country, it is heartening to hear that around 69% of the country’s adult population has received at least one dose of COVID-19 vaccine and 25% has taken both doses. Despite these achievements, caution needs to be strictly exercised in view of the upcoming festive season in India. We see the more realistic economic growth projections for India by global development organisations.

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Asian Development Bank – The Asian Development Bank (ADB) recently released its Asian Development Outlook Update, September 2021. With respect to India, it was mentioned Compared to last year, the economy rebounded strongly in the first quarter (Q1) of fiscal year 2021 (FY2021, ending 31 March 2022). It is expected to grow this year almost as quickly as forecast in ADO 2021, notwithstanding a dramatic second wave of COVID-19 infections that struck in April and May. Inflation is now projected to stay higher in FY2021 than forecast in ADO 2021 because of rising input prices, but the forecast for lower inflation in FY2022 is sustained. Forecasts for current account deficits in both years are unchanged from ADO 2021. GDP grew in Q1 FY2021 by 20.1% year on year, rising by double digits because of a large base effect. Despite the high pace of year on year growth, it has yet to recover to its value in Q4 FY2019, just before the pandemic hit. At the same time, reflecting the adverse impact of a second wave of COVID-19, the economy contracted in Q1 FY2021 by 12.4% quarter on quarter in seasonally adjusted terms. the economy is expected to grow by 10.0% in FY2021 as more people get vaccinated and economic activity rebounds. The forecast is 1.0 percentage point below that in ADO 2021 (as reported by Asia Law Portal) to take into account the impact of the second wave. Growth is forecast to moderate to 7.5% in FY2022, above the ADO 2021 projection, assuming that a significant proportion of the population will be vaccinated by then and that domestic demand returns to normal. The government has ramped up its vaccination campaign, administering more than 10 million doses in 2 days in August. It approved vaccination for children as young at 12 years, which will help protect the younger population and facilitate normalization.

Organisation for Economic Co-operation and Development – The Organisation for Economic Co-operation and Development (OECD) recently released its OECD Economic Outlook, Interim Report titled ‘Keeping the Recovery on Track’. The report mentioned that Economic growth has picked up this year, helped by strong policy support, the deployment of effective vaccines and the resumption of many economic activities. Global GDP is projected to grow by 5.7% in 2021 and 4.5% in 2022. The output shortfall from the pre-pandemic path at the end of 2022 in the median G20 emerging-market economy is projected to be twice that in the median G20 advanced economy, and particularly high in India and Indonesia. The real GDP growth projections for India in 2021 is 9.7%. The same reduces to 7.9% in 2022. These projections remain the highest amongst countries covered in the table of the report.

Fitch Ratings – Fitch Ratings recently released its Global Economic Outlook – September 2021 report. Fitch Ratings slashed India’s FY21 growth projection to (-) 10.5 per cent, from (-) 5 per cent estimated earlier, saying the continued spread of the virus and imposition of sporadic shutdowns across the country has disrupted economic activity. In the first quarter of current fiscal India’s gross domestic product (GDP) contracted by a massive 23.9 per cent. Fitch said India recorded one of the sharpest GDP contractions in the world in the April-June quarter, but noted that growth should rebound strongly in the July-September period amid re-opening of the economy. However, there are signs that the recovery has been sluggish and uneven, it said. For the next fiscal, Fitch estimated Indian economy to grow 11 per cent, while for 2022-21 growth would be 6 per cent.

Moody’s Investors ServicesMoody’s Investors Service recently slashed India’s growth projection to 9.6 per cent for 2021 calendar year, from its earlier estimate of 13.9 per cent, and said faster vaccination progress will be paramount in restricting economic losses to June quarter In its report titled. ‘Macroeconomics – India: Economic shocks from second COVID wave will not be as severe as last year’s’, Moody’s said high-frequency economic indicators show that the second wave of COVID-19 infections hit India’s economy in April and May. With states now easing restrictions, economic activity in June is likely to signify the trough. “The virus resurgence adds uncertainty to India’s growth forecast for 2021; however, it is likely that the economic damage will remain restricted to the April-June quarter. We currently expect India’s real GDP to grow at 9.6 per cent in 2021 and 7 per cent in 2022,” Moody’s said.

FDI Inflows IncreaseForeign direct investments (FDI) into the country more than doubled to $20.42 billion during the April-July period of the current fiscal, the commerce and industry ministry said on Wednesday. This is a whopping 112% increase from $9.61 billion of FDI equity inflows in the same period last year. Total FDI- that includes equity inflows, reinvested earnings and other capital-rose 62% on-year to $27.37 billion during the first four months of FY22 as against $16.92 billion in the corresponding period a year ago. “Measures taken by the government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country,” the ministry said.
Overall, among states, Karnataka was the top recipient of investment from overseas with 45% share of the total FDI equity inflows followed by Maharashtra (23%) and Delhi (12%).

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra, India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel in Delhi, India; views expressed are personal; he can be reached at; Twitter: @sourish247

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