Indian economy may grow 8.8 to 9 per cent in 2021-22, report says

INDIA’S gross domestic product (GDP) growth is expected to be 8.8 to 9 per cent in the financial year ending March 2022, backed by agriculture and industry sectors, Care Ratings said in a report.

In the fiscal year 2020-21, the country’s economy had contracted by 7.3 per cent.

In view of a negative base effect, Indian economy looks seemingly better this year, the rating agency said in its Economic Outlook for 2021-22.

Overall demand in the country is seen weak and services sector is unlikely to grow much this year as the second lockdown affected industries like tourism, hospitality, retail malls and entertainment.

It highlighted that the spending pattern of the rural households would be a key factor this year, which should be supported by prospects of a stable harvest amid forecast of a good monsoon.

"Higher consumption should stimulate investments. The crux will be an investment which has a multiplier effect on demand and investment," it said.

Increase in the cost of services and high fuel price would keep consumer price index-based inflation (CPI) elevated at around 6 per cent by March-end.

Wholesale price index-based inflation will be in double digits because of the low base effect and rising global commodity prices.

"Given the high inflation numbers witnessed so far and our expectation of CPI inflation to remain elevated, it does not look likely that there can be any rate cut at least in the 2021 calendar year," the agency said.

It has forecast the non-performing assets (NPAs) of banks to be at 10-10.5 per cent for March 2022.

The report further said that inflow of foreign portfolio investment (FPI) would be lower than last year, in the range of $18-22 billion (£13bn-£15bn)

It estimates the country's foreign exchange reserves to be around $620bn-630bn (£449bn-£456bn) by March-end.