After suffering a heavy blow on its growth rate owing to the year-long COVID-19 pandemic, India's GDP is expected to rise by 11% in 2021-22, Fitch Ratings said in its analysis on Tuesday. "We expect the gross domestic product (GDP) to expand by 11 percent in FY22 (April 2021 to March 2022) after falling by 9.4 percent in FY21 (April 2020 to March 2021)," it said.
In the months subsequent to the COVID-19 pandemic and lockdown, India's GDP had sunken 23.9 percent below its 2019 level in April-June with nearly a quarter of the country's economic activity wiped out. Following this, a 7.5 percent decline in GDP had pushed the nation battling the health crisis into an unprecedented recession. India's overall FY 19-20 GDP stood at 4.2% at an 11-year low.
According to Fitch Ratings, India's coronavirus-induced recession was among the 'most severe' in the world, amid a stringent lockdown and limited direct fiscal support. However, things look brighter for the Indian Economy which is expecting an 11% rise in the GDP in FY22, a positive indicator from a real low point.
However, according to Fitch Ratings, after an initial rebound, India's GDP would once again start functioning with a medium-term recovery path at 6.5 percent per annum from FY23 to FY26. "The economy should be able to grow somewhat faster than estimated supply-side potential over the medium term following the unprecedented downturn in FY21. But our projection for the medium-term recovery path - at around 6.5 percent per annum over FY23 to FY26 - would leave GDP well below its pre-pandemic trend," it said.
"Our historical analysis of India's growth performance highlights the key role played by a high investment rate in driving growth in labour productivity and GDP per capita over the last 15 years. But investment has fallen sharply over the last year and the need to repair corporate balance sheets and firm closures will weigh on the pace of recovery," it added.
Meanwhile, as per the National Council for Applied Economic Research (NCAER), indicators across industry and services like the goods and services tax (GST) collections, GST e-way bills, Index of Industrial Production, and Purchasing Managers’ Index have moderated the pace of recovery after the September-October uptick. Adjusting its forecast, the NCAER has projected growth for the ongoing fiscal at -7.3% compared to -12.6% in September, accounting for the sharp moderation in contraction in the second quarter at -7.5%, as per reports.