India's Economic Outlook FY 2022-23

The Indian economy is expected to revert to growth in FY22 after a dip of 7.3 percent in FY21, as per the latest CA Annual Equity Assessment 2022 by Client Associates, an independent wealth management firm in India. 

The firm's annual report stated that the macro profile of the country remains largely conducive to growth. It said that strong government spending along with improving exports and effective policy measures by RBI and the government are likely to support strong economic activities in FY2023.

The assessment highlighted that high-frequency indicators such as PMIs are consistently in the expansion zone and the robust GST collections are positive drivers for the economy.

Union Finance Minister Nirmala Sitharaman had also announced during her Budget 2022 speech that India had recorded Gross GST collections at Rs 1,40,986 crore for January 2022, which is the highest since the inception of GST. 

Read more: Income Tax Budget 2022: No change in Income Tax slabs, 30 percent tax on virtual asset transfer

India's Economic Growth between FY2015-FY2020

The CA Annual Equity Assessment 2022  noted that India's Economic Activities between FY2015 and FY2020 witnessed a sequential slowdown from 8.3% in FY17 to a 7.3% contraction in FY21 due to the COVID-19 pandemic. The pace of India's growth averaged a weak 3.5% growth during the period due to weak industrial output and fall in private consumption demand.

India's Economic Growth in H1 of FY22

• The first half of the FY 2021-22 witnessed a strong rebound in economic activities after the disruption caused by the destructive second wave of the covid-19 pandemic. The economic recovery was aided by rapid COVID-19 vaccination, reopening of domestic economy, accommodative monetary policy and expansionary fiscal policy.
• India's real GDP growth stood at 20.1 percent during the first quarter of the fiscal year and at 8.4 percent in the second quarter.
• Overall, the domestic output registered in the first quarter was lower than pre-pandemic levels and also registered a 16.8 percent drop in comparison to the previous quarter due to the second wave of the pandemic.
• However, stable growth in agriculture sector and broad-based recovery in industrial output helped the national headline output register a marginal expansion of 0.3% over the pre-pandemic levels in the second quarter of FY 21-22. 
• Further, a rise in government  expenditure and a strong capital outlay to improve investment activity further supported the rebound in economic activities, as per the report. The liquidity conditions also remained at ease due to large-scale OMO operations by RBI. 

India's Economic Outlook for H2 of FY 22

• CA Annual Equity Assessment 2022  notes that as per the first advanced estimates released by National Statistical Office, the domestic economic activity is poised to register an expansion of 9.2 percent. 
• The agricultural sector is expected to report a 3.9 percent growth in output subject to good monsoon season and rise in area under cultivation.
• Other sectors including manufacturing, mining and construction are also expected to register a double digit growth.
• The services sector, however, is expected to report a slower rebound, which can negatively impact the overall domestic growth.

India's Economic Outlook for FY 23

CA Annual Equity Assessment 2022  stated that the World Bank upgraded India's growth prospects in FY23 to 8.7% from an earlier estimate of 7.5% in its recent update.

As per the latest estimates, India's economic growth is expected to be between 7.5-9% during the next fiscal. 

India's GDP growth in FY 23 is expected to be supported by strong government spending and capital expenditure in the absence of a meaningful pickup in private consumption demand, noted the report.

FM Nirmala Sitharaman had announced a 35 per cent increase in the outlay for capital expenditure in FY23 in her Union Budget 2022 speech.

Read more: Capex Budget 2022: Capital Expenditure Hike by 30%, Check Key Highlights Here

RBI Bi-monthly Monetary Policy Review: February 2022

The Reserve Bank of India decided to continue its accommodative stance and kept repo rate unchanged at 4 percent and the reverse repo rate unchanged at 3.35 percent during its bi-monthly monetary policy review on February 10, 2022. 

The RBI also projected real GDP growth at 7.8 percent for the fiscal year 2022-23.The CPI inflation projection has also been retained at 5.3% for FY 2021-22 and 4.5% for FY 2022-23.

Read full RBI Bi-monthly Monetary Policy Review here

Background

The CA Annual Equity Assessment 2022 is the 7th edition of the report.  The first edition of the assessment was launched by Client Associates in January, 2016