Indian economy set to expand 10% in fiscal year 2022: S&P
India’s economy is set to expand 10% in the year starting April 1, aided by sustained farm sector growth, Covid-19 vaccination and a bigger central government budget, S&P Global Ratings said on Tuesday.
Stronger-than-expected recovery of corporate earnings after the pandemic-related disruption, improved goods and services tax (GST) receipts, mobility trends showing driving in India has surpassed pre-pandemic levels, and several high-frequency indicators such as purchasing managers’ indices point to positive near-term prospects, S&P said.
An increase in commodity prices and a revival of domestic demand after the easing of lockdown have brought upside earnings surprises while changing consumer choices such as the preference for personal transport for health-safety reasons, have helped industries such as automobiles, S&P said.
Separately, rating agency Icra Ltd said in a forecast on Tuesday that leaving behind the devastating recession, gross domestic product (GDP) recorded a 0.7% growth in the December quarter from a 7.5% contraction in the September quarter.
“This pickup benefited from the continued unlocking of the economy, uptick in consumption during the festive season, as well as higher central government spending,” Aditi Nayar, principal economist, Icra Ltd, said in a statement.
S&P said that the higher-than-expected spending programme that finance minister Nirmala Sitharaman unveiled in the budget will support India’s growth recovery, which it said was critical for sustaining higher fiscal deficit—9.5% of GDP in the year to March.
India’s sovereign ratings—a bone of contention between the finance ministry and the rating agencies—will hinge on the pace of recovery. “We expect the speed of India’s post-crisis recovery to have important implications for the sovereign credit rating. This includes the sustainability of the government’s strained fiscal position,” S&P said.