The finance ministry on Tuesday said high-frequency indicators — including power consumption, inter-and-intra-state mobility, manufacturing capacity utilisation, business expectations and consumer confidence — in January point at a “sustained and strengthening economic recovery”.
In its latest monthly economic report, the department of economic affairs said the Budget announcements, which have focussed on elevated spending in areas with high-multiplier effect, along with structural reforms and the policy push under the Aatmanirbhar Bharat initiative will bring the economy back on to a “strong and sustainable growth path” in FY22.
The International Monetary Fund has forecast a 11.5% real GDP expansion for India in FY22 and 6.8% in FY23. With this, India is set to return as the world’s fastest-growing major economy, beating China.
Highlighting encouraging trend across some gauges, the report said GST mop-ups in January have hit a record. Manufacturing and services PMI remain in expansionary zone while augmented credit growth, surging FDI and FPI flows and private placement of corporate bonds are providing critical financial cushion to the real recovery.
The report also highlighted a “convergence across three windows (economic survey, Budget and monetary policy review) of policy intervention” that “lays to rest any ambiguity on the growth agenda of the government”.
The Economic Survey pitched for growth through counter cyclical fiscal policy emphasising that growth alone is the answer to sustaining the public debt burden of the country. The Budget for 2021-22 implemented the counter cyclical fiscal policy by raising the target of fiscal deficit to 6.8% of GDP, more than double the FRBM target.
“With the expanded borrowing programme mostly meant for funding the enhanced capital outlay, the Budget has set in place the multiplier impact on growth to support the prescribed fiscal glide path tapering to 4.5% of GDP in 2026,” it said.
Similarly, the monetary policy committee statement issued last week has kept the already low policy repo rates unchanged and maintained its accommodative stance on growth, extending deeper into 2021-22.