India to grow at 10.1% in FY2022: Icra

India’s economy is expected to see double digit growth at 10.1% in the FY22 according to ICRA, however the rating agency cautioned that in absolute terms the country’s gross domestic product (GDP) would only “mildly” surpass the levels of FY20.

“The seemingly-sharp expansion will be led by the continued normalisation in economic activities as the rollout of Covid-19 vaccines gathers traction, as well as the low base,” said Aditi Nayar, principal economist at ICRA, in the report released on Monday.

The rating agency had projected a 7.8% contraction for the ongoing fiscal, in line with the recently released first advance estimates of GDP by the Centre, which pegged the shrinkage in FY21 at 7.7%.

In terms of sector-wise recovery, ICRA saw contact-intensive sectors, discretionary consumption and private investment lagging behind during the coming fiscal.

“We expect a multi-speed recovery in FY2022, with the contact-intensive sectors, discretionary consumption and investment by the private sector trailing the rest of the economy, in the arduous march back to attaining, and sustaining, pre-Covid levels,” Nayar said.

According to the report, the twin deficits in the fiscal and current account, would see divergent trends in FY22, with the former declining while the latter would reverse the likely surplus in the current fiscal.

“As the revenue shock ebbs, we project India’s general Government (Centre + states) fiscal deficit to moderate to 8.5% of GDP in FY2022 from the 12.0-12.5% of the GDP expected in the current year,” Nayar said.

“However, with imports expected to revive in tune with the anticipated recovery in domestic demand, the current account balance is forecast to slip back into a modest deficit of US$15-20 billion (or 0.6% of GDP) in FY2022 from a surplus of US$35-40 billion in FY2021,” she added.

On prices, the report forecast headline retail inflation at 4.6% for the upcoming fiscal against the projected 6.4% for FY21 on the back of a favourable base effect that would moderate food inflation at 4.7%.

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