India Ratings Revises FY22 GDP Growth To 9.4%

India Ratings and Research (Ind-Ra) in its last forecast has said that the economic recovery would depend on the progress of the vaccination drive. If India is able to vaccinate its entire adult (18+) population by 31 December 2021, then the GDP growth is expected to come in at 9.6% yoy in FY22, otherwise it may slip to 9.1%.

"Going by the pace of vaccination, it is now almost certain that India will not be able to vaccinate its entire adult population by 31 December 2021. Also, the agency's estimate suggests that 5.2 million daily doses would have to be administered 18 August 2021 onwards to fully vaccinate more than 88% of the adult population as well as to administer single doses to the rest by 31 March 2022," the brokerage has said.

A glance at the National Accounts Data shows that of the four demand-side growth drivers namely 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% during FY19-FY21, the ratings agency has said.

"PFCE, GFCF and exports during this period grew 1.3%, 1.5% and 1.5%, respectively. Of the demand-side drivers, PFCE, proxy for consumption demand, is the largest component accounting for 58.6% of the GDP in FY21, followed by GFCF accounting 27.1%, exports 18.1% and GFCE 12.5%," it has noted.

Among the other demand-side growth drivers, only exports appear to be a bright spot. As 1QFY22 exports volume and growth indicates a revival backed by a favourable global trade outlook, Ind-Ra expects exports growth of goods and services to grow at 16.0% yoy in FY22. Given that economy is still not out of the woods, fiscal support in the form of government expenditure is likely to continue. GFCE growth averaged 7.1% during FY16-FY21 and is projected to grow at 7.5% in FY22.