GDP growth expected to be 8.5% in the financial year 2021-22, says rating agency ICRA

India GDP growth 2022: ICRA expects reduction in domestic demand to constrain pricing power

The Gross Domestic Product (GDP) for the fiscal year 2021-22 is projected to grow at 8.5 per cent year-on-year. While the Gross Value Added (GVA) at basic prices is estimated at 7.3 per cent by credit rating agency ICRA. According to a statement shared by the agency, if the vaccine coverage in the country is intensified with the recent procurement policy, the GDP expansion could increase to 9.5 per cent in the third and fourth quarters of the fiscal. (Read also: India one of the few economies to witness growth in 2 consecutive quarters: Report

ICRA Chief Economist Aditi Nair said April and May saw the impact of the COVID-19 pandemic and the second wave of state-wise lockdown restrictions in various high frequency indicators. Now the rating agency has kept its baseline GDP growth forecast for the financial year 2021-22 at 8.5 per cent, as the number of fresh cases has come down and mobility restrictions are eased.

For the full fiscal year, the agency forecasts GDP growth to exceed 120 basis points, based on expectations related to the value of taxes on products as well as subsidies of products.

The credit rating agency expects a prolonged negative impact of the second COVID-19 curve on consumer sentiment and fuel spending, along with healthcare demand, could impact disposable income. These factors may lead to lower demand or replacement demand in the current financial year as compared to FY 2020-21.

Even as a second wave of the pandemic has dampened the near-term outlook for the economy, global commodity prices are rising as a result of vaccine optimism. The firm expects the pricing power to be constrained by softening domestic demand, leading to lower margins in several sectors.



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