New Delhi, Jan 31 (PTI) The Economic Survey’s GDP forecast of 8-8.5 per cent for the next fiscal is optimistic as it is based on several positive assumptions, some of which may not hold owing to evolving geo-political developments and the uncertain trajectory of COVID-19, experts and a section of the industry said on Monday.
India Inc opined that the Budget should outline measures to aid the recovery process by improving demand and enhancing capital expenditure on infrastructure, observing that it is expected to focus on fiscal management and reforms to give a booster dose to the economy.
Finance Minister Nirmala Sitharaman will present the Budget for 2022-23 in Parliament on Tuesday whereas the Economic Survey 2021-22 was unveiled on Monday.
Ficci President Sanjiv Mehta said, “As per the Economic Survey, India is expected to see further momentum in economic recovery, with GDP growth projected at 8-8.5 per cent for 2022-23.
“While this is encouraging, we need to be mindful of the fact that some of the assumptions that underpin this projection could turn out to be more complex and limit the growth projection towards the lower end of the band”.
He observed that the evolving geo-political developments and their impact on oil prices, the likely accelerated pace of monetary policy normalisation by central banks and the still uncertain trajectory of the Covid-19 pandemic could throw up newer challenges for the economy in the year ahead.
“It is therefore important that the upcoming Union Budget outlines measures that would aid the recovery process by improving demand and enhancing capex on infrastructure,” added Mehta.
Ranen Banerjee, a partner and leader of economic advisory services at PwC India said the survey recognizes the risks faced by the economy and the growth projection of 8-8.5 percent is possibly at the optimistic end of the spectrum given several underlying assumptions. The projections are based on assumptions that there will be no further debilitating pandemic related disruption.
Elaborating further, he said the forecast is based many positive assumptions like there will be normal monsoons, global central banks will undertake an orderly withdrawal of liquidity, crude prices will range in USD 70-75 a barrel during FY23 and global supply chains will ease gradually.
It is quite likely that some of these assumptions may not hold and there could be other risks emerging from rising geopolitical tensions that have not been stated in the assumptions. Therefore, we should realistically expect sub-8 percent growth in FY23 and anticipate an agile approach to fiscal management in the budget, he said.
Dharmakirti Joshi, the chief economist at Crisil, opined that the 8-8.5 per cent growth outlook for FY23 looks optimistic as there are downside risks largely from external factors such as high crude prices and reversal of monetary policy by systemically important central banks.
The survey is optimistic on the medium-term prospects due to infrastructure capex focus and supply-side reforms. We also believe with a nudge from government’s infrastructure investments and the PLI scheme, private investments will also revive gradually, he said.
The survey highlights the strong external position with the current account deficit under check and low levels of short-term external debt. This has made the country a bit resilient to the Fed actions than in 2013-14. But any further surprises from the Fed can create volatility in an environment of rising crude prices and heightened geopolitical risks, he warned and said the survey also flags risks to inflation, which if they play out, can lead to faster normalization of monetary policy.
“Hope FM gives us a booster dose of incentives to overcome pandemic impact on our economy! We need to spur consumption n revive travel, tourism n hospitality. Common man needs more disposal income to combat inflation,” Biocon Executive Chairperson Kiran Mazumdar-Shaw tweeted.
CII Director General Chandrajit Banerjee said the Economic Survey’s GDP growth forecast of 9.2 per cent for this year and 8-8.5 per cent for the next year will catapult India as the fastest growing major economy of the world for two consecutive years.
“We believe that going forward, continued reforms, focus on capital expenditure, continuous strengthening of our healthcare systems and the micro containment strategy to ensure minimal supply chain disruptions, will all act as a booster dose to the economy, enabling India to grow at sustained high rates. We look forward to the forthcoming budget to focus on these areas, stated Banerjee. “The Survey rightly notes that a continuing thrust on capital expenditure, especially in areas such as infrastructure and a revival of the housing cycle would act as a key enabler to revitalize growth in the economy and take GDP growth to 8-8.5 per cent during FY23,” CII President T V Narendran said.
India’s economy is expected to grow by 8-8.5 per cent in the fiscal beginning April 1 and is well placed to meet the future challenges on the back of widespread vaccine coverage, supply-side reforms and easing of regulations, said the Economic Survey, tabled in Parliament on Monday.
The Survey expects the economy to grow by 9.2 per cent during the current financial year, indicating a recovery to the pre-pandemic level.
Assocham said it shares the prognosis of the Economic Survey that the Indian economy is well placed to take on the challenges of 2022-23, riding on the back of continuous reforms in supply side and safety nets to the vulnerable sections of the society, hit by the Covid-19 pandemic.
Assocham Secretary General Deepak Sood said schemes like Credit Guarantee with 100 per cent guarantee for additional funding of Rs 4.5 lakh crore to MSMEs have provided a critical relief to the sectors, severely hit by the pandemic, adding that more such measures are expected in the Budget.
Chief Policy Advisor at Ernst & Young D K Srivastava said the economic survey’s 2022-23 forecast for real GDP growth in the range of 8-8.5 per cent is tangibly below the IMF’s latest projection at 9 per cent.
According to him, the main reason for the lower forecast is non-availability of significant base effects in 2022-23 as compared to 2021-22. In fact, when these base effects were absent in Q3 and Q4 of 2021-22 and economic activities had started to normalize, the average growth in the second half of 2021-22 was only 5.6 per cent.
“As such, even a growth of 8-8.5 per cent may prove to be optimistic particularly if the underlying assumption regarding global crude prices being in the range of USD 70-75/bbl. is belied. The higher petroleum prices however translate into relatively higher WPI and IPD-based inflation rates. This is proving to be the main reason for buoyant tax revenue growth,” Srivastava said.
On the other hand Aditi Nayar, the chief economist at Icra Ratings said the growth forecast is built in a cushion for any disruption caused by future waves of the pandemic. The survey expects continued government capex to lift durable recovery.
She also said the government will marginally overshoot the 6.8 percent fiscal deficit target as the survey expect spending to be back-ended through the rest of the current fiscal. Following the conversion/switch of G-secs with the RBI, she has pegged gross dated borrowing of the Centre at Rs 12.3 trillion in FY23.
Sanjeev Krishan, the chairman of PwC India said the survey pegs real GDP growth forecast reflects the resilience that is built in through major supply-side structural and process reforms even as it acknowledges the prevailing uncertainty and the slippery slope ahead. PTI RSN BEN MR MR
