NEW DELHI: India is likely to grow by 11% in the next financial year (FY22), the annual Economic Survey tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha on Friday said, predicting a V-shaped recovery from the sharp 7.7% economic contraction in this pandemic hit year.
“With the economy’s returning to normalcy brought closer by the initiation of a mega vaccination drive, hopes of a robust recovery in services sector, consumption, and investment have been rekindled,” said the Survey. However, it cautioned it would take at least two years to get back to the prepandemic levels.
The Survey, an annual exercise in economic stocktaking and future policy prescriptions, drew lessons from the pandemic to strongly recommend raising healthcare spending from 1% to 2.5-3% of GDP.
It indicated that the government would overshoot its fiscal deficit target by a wide mark and may look at increased spending and stimulus measures in the year ahead to push growth.
Former member of the PM’s Economic Advisory Council and Chief Economist with Brickwork ratings Dr M Govinda Rao said: “Relaxation in fiscal deficit targets may be necessary, and the government may have to revise the target upwards for the current year in view of the need to augment capital expenditures.”
While analysts at Barclays say the fiscal deficit has widened to 7.7% of GDP, Darren Aw, Asia Economist at Capital Economics, calculated it at 8%.
This is against a target of 3.5% set in this year’s Budget. Chief Economic Advisor Dr K Subramanian said: “Reforms must go on to enable India to realise its potential growth and erase the adverse impact of the pandemic.”
Analysts predict a spate of state-run enterprise privatisations and asset sales in the budget to help fund infrastructure spending the government is likely to have planned.