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    India Ratings lowers GDP growth forecast to 9.4% for FY22

    India Ratings lowers GDP growth forecast to 9.4% for FY22

    India Ratings lowers GDP growth forecast to 9.4% for FY22
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    By CNBCTV18.com  IST (Updated)

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    Credit ratings agency India Ratings on Thursday lowered its gross domestic product (GDP) forecast for the country’s economy to 9.4 percent for the current financial year from 9.6 percent. Official data on India’s GDP for the April-June period will be released later this month.

    Credit ratings agency India Ratings on Thursday lowered its gross domestic product (GDP) forecast for the country’s economy to 9.4 percent for the current financial year from 9.6 percent. In its mid-year review, the agency said that going by the pace of vaccinations against Covid-19, it is now almost certain that the country will not be able to fully vaccinate its entire adult population by December 31.
    Stating that economic recovery would depend on the progress of the vaccination drive, India Ratings, in its June forecast pegged India’s GDP growth at 9.6 percent. Otherwise, the GDP growth may slip to 9.1 percent, it had said.
    In its latest forecast, India Ratings said that its estimates suggest that 5.2 million daily doses would have to be administered August 18 onwards to fully vaccinate more than 88 percent of the adult population.
    The agency, however, said that with the ebbing of Covid 2.0, several high-frequency indicators are showing a faster-than-expected rebound, the country’s Kharif sowing is indicating a significant pickup with the revival of the south-west monsoon, and exports volume and growth have shown a surprise turnaround in the June quarter. “Yet, FY22 GDP will be 10.9 percent lower than the trend value,” India Ratings said in its report released on Thursday.
    A glance at the National Accounts Data shows that of the four demand-side growth drivers, private final consumption expenditure (PFCE), government final consumption expenditure (GFCE), gross fixed capital formation (GFCF) and exports, only GFCE has shown somewhat decent growth, averaging 5.7 percent during FY19-FY21, according to India Ratings.
    Private final consumption expenditure, government final consumption expenditure and exports during this period grew 1.3 percent, 1.5 percent and 1.5 percent, respectively, it added.
    Of the demand-side drivers, PFCE - a proxy for consumption demand - is the largest component accounting for 58.6 percent of GDP in FY21, followed by GFCF (27.1 percent), exports (18.1 percent) and GFCE 12.5 (percent), according to India Ratings.
    It also said that PFCE growth has turned positive in the March quarter, after a gap of three consecutive quarters, and is expected to maintain momentum.
    India Ratings said it expects PFCE growth to come in at 10.4 percent in FY22 as against its earlier projection of 10.8 percent.
    "Covid 2.0 hit the country in April and May 2021 with such speed and scale that once again there has been a push back to PFCE. In fact, the Indian economy had begun to witness a consumption slowdown even before the Covid-19 pandemic hit it," India Ratings said.
    Official data on India’s GDP for the April-June period will be released later this month.
    For the quarter ended March 31, India’s annual economic growth rate came in at 1.6 percent, mainly driven by state spending and manufacturing sector growth.
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