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How Economic Survey projected a growth o

  Jan 31, 2021

How Economic Survey projected a growth of 11% in FY 2021-22

Q. What is the news?

  • After an estimated 7.7 per cent contraction in 2020-21, the Finance Ministry’s Economic Survey projects that India’s real GDP would record a growth of 11 per cent in 2021-22. The nominal GDP growth has been estimated at 15.4 per cent, implying an assumption of 4.4 per cent inflation during the year.

Q. On what basis has the 11 per cent growth projection been made?

  • One of the factors is the low base while calculating the year-on-year inflation rate, given the contraction this fiscal. The Survey noted that the “conservative estimates” of growth in FY22 “reflect upside potential that can manifest due to the continued normalisation in economic activities as the rollout of Covid-19 vaccines gathers traction”. 
  • This will further be supported by a supply-side push from reforms and easing of regulations, push to infrastructural investments, boost to manufacturing sector through the Productivity Linked Incentive Schemes, recovery of pent-up demand for the services sector, increase in discretionary consumption subsequent to the roll-out of the vaccine and pick up in credit given adequate liquidity and low-interest rates, the survey noted.

Q. Why is this significant?

  • What is significant is that this path would entail a growth in real GDP by 2.4 per cent over the absolute level of 2019-20 – implying that the economy would take two years to reach and go past the pre-pandemic level.

Q. Are these in line with other projections?

  • The Ministry’s projections are in line with IMF estimates of real GDP growth of 11.5 per cent in 2021-22 for India and 6.8 per cent in 2022-23. India is expected to emerge as the fastest growing economy in the next two years as per IMF, the Survey has noted.