The high GDP growth despite low base of last year has given confidence that the Indian economy may well grow over 9 per cent in FY22 with tailwinds coming from rapid recovery of manufacturing and construction sectors.
The data released by the Union Ministry of Statistics on Tuesday showed that the country’s GDP has recovered swiftly to clock a growth of 20.1 per cent in the April-June quarter of FY22 as against a contraction of 24.4 per cent seen in the same period of previous year.
Though the Q1 growth is a tad lower than RBI’s expectation of 21.4 per cent growth, it is still on course to make a good recovery taking the economy back to its pre-Covid size.
According to a Bank of Baroda economic research, GDP is expected to grow at 9.7 per cent in FY22. The improving pace of vaccinations, government tax collections, exports and corporate investments in select sectors are a tailwind for growth, it has said.
Taking a similar line, a report by Kotak Institutional Equities expects GDP growth of 9 per cent in FY22 against RBI’s own projections of 9.5 per cent growth. But the brokerage has cautioned that growth momentum may get disrupted if a third wave of the pandemic comes before a larger population gets fully vaccinated. Furthermore, one of the key drivers of growth in CYTD21 has been robust external demand, which risks slowing given the increasing Covid cases globally.
Additionally, surging freight costs and container shortages amid logistic bottlenecks pose downside risks to growth. So may be the pressure of lower agricultural yield this year in wake of projections of lower than normal monsoon.
Agriculture sector has been pandemic resilient. Its output is 8 per cent above pre-pandemic level. A below normal monsoon poses a risk to its growth in FY22.
But according to BoB research manufacturing and construction activity are likely to do well on the back of exports and government spending. Contact intensive services sector is likely to recover with a lag and rising infections in certain states pose a risk to services recovery.