India's FY22 GDP growth to be 9.2% with downward bias: Care Ratings

13 May '21

2 min read

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India's GDP growth for FY22 will be 9.2 per cent with a downward bias as against 10.2 per cent that was projected in April on the assumption that the lockdowns would be rolled back in June, said domestic rating agency Care Ratings. It has revised the GDP growth projection for the fourth time since March, bringing it down from 11-11.2 per cent to 9.2 per cent.

There is a double whammy due to the second wave – of a lockdown as well as personal health of workers, the agency said in its latest report. The infections are spreading to the interiors too in most states which also means that agriculture, which was isolated from the first wave, can be affected this time. Supply chains are being affected this time due to workers getting infected unlike the first wave in 2020 when there were restrictions on the movement of goods.

GDP in FY21 was ₹134.08 lakh crore that was to increase to ₹148.83-₹149.10 lakh crore as per the agency’s March forecast. The GDP level in real terms will be ₹146.42 lakh crore based on 9.2 per cent growth. The lower growth in GDP compared to the initial estimate of 11.2 per cent would mean a loss of ₹2.68 lakh crore in real terms or ₹3.89 lakh crore in nominal terms.

The budget had targeted a nominal GDP of ₹222.87 lakh crore. The fiscal deficit was estimated at ₹15.07 lakh crore accordingly. With real GDP growth falling by ₹2.68 lakh crore, nominal GDP would now be reduced to ₹218.98 lakh crore with a loss of nearly ₹3.9 lakh crore of income.

Further, with GDP growth slowing down by 2 per cent points, the overall tax revenue to the centre will come down from ₹15.45 lakh crore to ₹15.11 lakh crore, which is a shortfall of ₹34,000 crore, the agency said.

Last month, the government had announced an outlay of ₹25,000 crore on account of the free food programme for 800 million people. This additional cost combined with the potential decline in tax revenue will mean an increase in deficit by ₹59,000 crore. The revised fiscal deficit under ceteris paribus conditions would be ₹15.66 lakh crore or 7.15 per cent of GDP. This is assuming that the government spends the additional ₹25,000 crore outside the budget and does not channel the same from an existing allocation.

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