Finance Ministry expects India's GDP to grow by upto 19% in FY22
New Delhi : Amid coronavirus pandemic, the GDP of India slipped drastically by over minus 30% and many experts believe that it will take a while to recover from the situation. However, Finance Ministry expects it to grow by 19% in FY22.
The projection is a bit modest when compared with some estimates that the Fifteenth Finance Commission (FFC) has received from experts, the Commission's chairman NK Singh told Mint in an interview, citing a presentation made by Krishnamurthy Subramanian., chief economic advisor in the finance ministry.
"Going forward, we had to make projections about the rebound from a very low base year. There are varied estimates. The chief economic advisor said in the presentation it could go as high as 19%, while some had even said it could be 21% as an extreme case and others said it could be more modest," said Singh, terming the rebound mechanical as it comes on a low base.
The finance ministry, however, has put GDP estimates for the current financial year while most forecasters now projecting a double digit contraction of GDP in FY21.
In its latest forecast issued on 11 September, Moody’s Investors Service had projected a 10.6% real GDP growth and a 4% CPI inflation for FY22, after an 11.5% contraction in the current fiscal.
In a statement laid down in the Parliament on Friday, the finance ministry said it is not able to submit Medium Term Expenditure Framework with rolling targets of indicative expenditure for FY22 and FY23 as mandated under the FRBM (Fiscal Responsibility and Budget Management) Act because it is not possible to obtain reliable projections of GDP growth at this time due to the continuing impact of COVID-19 pandemic on the Indian economy. “The expenditure of Union government in the medium term is determined partly by the GDP growth as governmental expenditure will have to substitute any slack in aggregate demand from the non-government sector. Determining expenditure based on non-robust GDP estimate has the danger of keeping the economy below its true growth potential. An emerging economy like India cannot afford to be below its growth potential for long," it added.