JOIN USTake a realistic view of economy
The National Statistical Office’s advance estimate for the current year gives a positive picture of the economy, though it also contains data and assumptions that should cause concern. It says the economy is set to grow at 9.2% in 2021-22. The economy made a big jump of about 14% in the first half of the year. The overall growth for the year would be moderated to 9.2% because growth in the second half would be about 5.6%. This is slightly less than the RBI’s projection of 9.5%, but India will still be among the fastest growing major economies of the world. This will also take the economy back to a cut above the pre-pandemic level.
There are some positive takeaways. One is the more than expected growth in tax collections. Tax collections may be up by about 16.2%, and the nominal growth rate is projected to be about 17.6%. The farm sector, which has done well through the pandemic period, is expected to register a robust 3.9% growth. Manufacturing is expected to register double-digit growth. Fixed investment is likely to be about 2.5% more than the pre-pandemic level. There are other performances also that stand out. But all this still do not mean that the economy is now better placed than in 2019-20.
While these are good auguries, there are several areas of concern. The growth has been uneven, with some important sectors lagging way behind others. The trade, transport and communications segment has not touched the levels it had two years ago. These and related sectors shrank in the past many months and the recovery is very slow. Consumer spending is the main driver of the economy but it is expected to grow only 6.9% this year, 2.9% less than in 2019-20. The biggest concern is over the impact of the Omicron wave on the economy. The NSO’s assumption that economic activity in the second half would be better than in the first half is unlikely to be correct. Though the new wave may not lead to lockdowns and closures it is likely to cause disruptions in economic activity. States have started imposing curfews and other restrictions and these will affect the recovery which is still fragile. Yet another matter of concern is the NSO’s expectation of inflation at 8.64%. The advance estimates are important because they provide the base data for the government in its budget process. But the government should factor in the negatives and uncertainties also when it formulates policies and proposals for the next fiscal.