India becomes fastest growing economy; inflation major risk: Economic Survey

New Delhi [India], January 31 : India is set to become the world's fastest-growing major economy with GDP growth of 9.2 per cent in the current financial year and projected to remain in the range of 8 to 8.5 per cent in 2022-23, according to Economic Survey 2021-22 tabled in Parliament on Monday.
Growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending.
According to the annual survey report tabled in the Parliament by Finance Minister Nirmala Sitharaman, India's GDP growth is estimated to slow to 7.1 per cent in 2023-24.
"Even going by the most conservative estimates, will be the world's fastest-growing economy," Sanjeev Sanyal, Principal Economic Advisor in the Finance Ministry and the lead author of the report.
However, the report also noted the challenges arising out of the new COVID-19 variants and uncertainties in the global economy and inflation.
Inflation has reappeared as a global issue in both advanced and emerging economies and India needs to be wary of "imported inflation", especially due to high oil prices.
"Inflation has reappeared as a global issue in both advanced and emerging economies. India's Consumer Price Index inflation stood at 5.6 per cent YoY in December 2021 which is within the targeted tolerance band," the report said.
"Wholesale price inflation, however, has been running in double-digits. Although this is partly due to base effects that will even out, India does need to be wary of imported inflation, especially from elevated global energy prices," it said.
The report noted that the "global environment still remains uncertain."
"At the time of writing, a new wave in the form of the Omicron variant was sweeping across the world, inflation had jumped up in most countries, and the cycle of liquidity withdrawal was being initiated by major central banks. This is why it is especially important to look at India's macroeconomic stability indicators and their ability to provide a buffer against the above stresses," it said.
Overall, macro-economic stability indicators suggest that the Indian economy is well placed to take on the challenges of 2022-23, it said.
One of the reasons that the Indian economy is in a good position is its unique response strategy. Rather than pre-commit to a rigid response, the Government of India opted to use safety-nets for vulnerable sections on one hand while responding iteratively based on Bayesian-updating of information.
This "barbell strategy" was discussed in last year's Economic Survey. A key enabler of this flexible, iterative "Agile" approach is the use of eighty High-Frequency Indicators (HFIs) in an environment of extreme uncertainty.
The Finance Minister tabled the Economic Survey 2021-22 along with Statistical Appendix.
Talking to media persons after the release of the report Chief Economic Advisor V Anantha Nageswaran said, the government pursued four-pronged approach to steer the economy from the COVID-19 crisis. This year's economic survey report was drafted by a team led by the principal economic advisor as the post of the chief economic advisor was vacant. Nageswaran joined to his new position just a couple of days ahead of the release of the report.
Referring to the Advance Estimates of National Income released by the National Statistical Office (NSO), the survey said India's Gross Domestic Product (GDP) is expected to expand by 9.2 per cent in the current financial year after contracting in 2020-21. This implies that overall economic activity has recovered past the pre-pandemic levels.
Almost all indicators show that the economic impact of the "second wave" in Q1 was much smaller than that experienced during the full lockdown phase in 2020-21 even though the health impact was more severe, it said.
Agriculture and allied sectors have been the least impacted by the pandemic and the sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the previous year.
Advance estimates suggest that the GVA of Industry (including mining and construction) will rise by 11.8 per cent in 2021-22 after contracting by 7 per cent in 2020- 21.
The Services sector has been the hardest hit by the pandemic, especially segments that involve human contact. This sector is estimated to grow by 8.2 per cent this financial year following last year's 8.4 per cent contraction.
Total Consumption is estimated to have grown by 7.0 per cent in 2021-22 with significant
contributions from government spending. Similarly, Gross Fixed Capital Formation exceeded pre-pandemic levels on the back of ramped up public expenditure on infrastructure.
Exports of both goods and services have been exceptionally strong so far in 2021-22, but imports also recovered strongly with recovery in domestic demand as well as higher international commodity prices.