The Indian economy is expected to maintain real GDP growth of 9 per cent each in FY2022 and FY2023, amidst the uncertainty ignited by the Omicron variant of Covid-19, according to ICRA.

The credit rating agency has estimated the net loss to the Indian economy from the pandemic at ₹39.30 lakh crore during FY2021-23.

ICRA noted that the available data (high frequency indicators) for Q3 (October-December) FY2022 does not offer convincing evidence that the Monetary Policy Committee’s (MPC’s) criteria of a durable and sustainable growth recovery has been met, to confirm a change in the Monetary Policy stance to neutral in February 2022.

Aditi Nayar, Chief Economist, ICRA Ltd, said: “The data for October-November 2021 does not point to a broad-basing of the growth recovery in India.

“After the higher-than-expected net cash outgo sought under the second supplementary demand for grants, the pace of actual Government spending is likely to determine whether the pace of GDP growth meaningfully exceeds 6.0-6.5 per cent in Q3 FY2022.”

Double-vaccinated adults to rise

Nayar expects the percentage of double-vaccinated adults to rise to 85-90 per cent by March 2022.

She observed that while the announcement of booster doses and vaccines for the 15-18 age group is welcome, it remains to be seen whether all the existing vaccines would offer adequate protection against the new Omicron variant to avert a third wave in India.

“In any case, fresh restrictions being introduced by several states to curb the spread of Covid-19 may temporarily interrupt the economic recovery, especially in the contact-intensive sectors in Q4 (January-March) FY2022.

“We are maintaining our forecast of a 9 per cent GDP expansion in FY2022, with a clear K-shaped divergence amongst the formal and informal parts of the economy, and the large gaining at the cost of the small,” Nayar said.

Looking ahead, ICRA expects the economy to maintain a similar 9 per cent growth in FY2023. However, the expansion in FY2023 is expected to be more meaningful and tangible than the base effect-led rise in FY2022.

“Based on our assumptions of the GDP growth if the Covid-19 pandemic had not emerged vs. the actual shrinkage that occurred in FY2021 and the expected recovery in the next two years, the net loss to the Indian economy from the pandemic during FY2021-23 is estimated at Rs. 39.3 lakh crore, in real terms,” Nayar said.

In ICRA’s view, rising consumption will push capacity utilisation above the crucial threshold of 75 per cent by the end of 2022, which should then trigger a broad-based pick-up in private sector investment activity in 2023. The rating agency also expects the visibility of tax revenue growth to spur faster Government spending in 2022.

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