Ratings agency ICRA on Tuesday said it expects the Indian economy to maintain a real GDP growth of 9 per cent each in FY22 and FY23, amidst the uncertainty ignited by the fast-spreading Omicron variant of Covid-19.
The rating agency highlighted that the available data for Q3FY22 does not offer convincing evidence that the Monetary Policy Committee’s (MPC’s) criteria of a durable and sustainable growth recovery has been met, to confirm a change in the monetary policy stance to neutral in February 2022.
“The data for October-November 2021 does not point to a broad-basing of the growth recovery in India,” ICRA Chief Economist Aditi Nayar said.
“After the higher-than-expected net cash outgo sought under the second supplementary demand for grants, the pace of actual Government spending is likely to determine whether the pace of GDP growth meaningfully exceeds 6-6.5 per cent in Q3FY22.”
The agency also said that similar to the trend in Q2FY22, the volumes of seven of the 13 high frequency indicators rose above their pre-Covid levels in October-November 2021, including GST e-way bills generation, non-oil exports, rail freight traffic, Coal India output, electricity generation, petrol consumption and ports cargo traffic.
However, the volumes of six of the 13 high frequency indicators contracted in October-November 2021 relative to October-November 2019, in line with the trend in Q2FY22, suggesting that the recovery is yet to broad-base.
As per the agency, the subset trailing their pre-Covid performance in October-November 2021, includes scooter production, domestic airline passenger traffic, vehicle registration, diesel consumption, passenger vehicle production and motorcycle production.
In addition, the rating agency concluded that the growth momentum is not broad-based enough to confirm a change in the monetary policy stance to neutral in the February 2022 review.
“Looking ahead, we expect the economy to maintain a similar 9 per cent growth in FY2023. However, the expansion in FY2023 is expected to be more meaningful and tangible than the base effect-led rise in FY2022,” Nayar added.
“Based on our assumptions of the GDP growth if the Covid-19 pandemic had not emerged vs. the actual shrinkage that occurred in FY2021 and the expected recovery in the next two years, the net loss to the Indian economy from the pandemic during FY2021-23 is estimated at Rs. 39.3 trillion, in real terms.”
