India’s economy, which was severely hit by the coronavirus lockdowns, is expected to see a strong recovery as soon as the 2021-22 fiscal year, according to the latest report penned by the country’s chief economic adviser.
The report presented to Parliament on Friday projects the country’s real GDP to reach record growth of 11 percent from April 2021 through March 2022. It also forecasts nominal GDP to grow by 15.4 percent, the highest since independence.
However, economists still see a contraction of 7.7 percent for the full fiscal year, with a V-shaped recovery in the next. The Indian economy, which has been battered by the coronavirus pandemic, shrank an unprecedented 23.9 percent in April-June.
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India will reportedly reap the ‘lockdown dividend’ from the well-timed preventive measures New Delhi adopted at the outbreak of the pandemic. Moreover, stable macroeconomic conditions are bolstered by a strong national currency, blooming foreign exchange reserves that climbed to a new high of $586.08 billion as of January 8, and positive signs in the manufacturing sector output.
“The scores of lives that have been saved and the V-shaped economic recovery that is being witnessed – due to the causal impact of initial lockdown – bear testimony to India’s boldness in taking short-term pain for long-term gain,” the survey reads.
Fiscal and monetary support provided by the Reserve Bank of India (RBI) also helped in the recovery, according to the report.
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Net exports turned positive in the first half of the year with a larger contraction in imports of 29.1 percent compared to a contraction in exports of 10.7 percent. With the gradual recovery of economic activity, both imports and exports have picked up and net exports are expected to re-enter negative territory in the second half.
Economists expect the agricultural sector to cushion the pressure from the Covid-19 pandemic on the economy with growth of 3.4 percent. The share of the sector in overall GDP will reportedly increase to 19.9 percent from 17.8 percent, fixed in 2019-20 fiscal year.
Meanwhile, mining is forecasted to shrink by 12.4 percent, manufacturing – by 9.4 percent, construction – by 12.6 percent. Within the service sector, trade, hotels, transport and communication are estimated to contract by 21.4 percent.
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