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The economy is likely to register a growth of 9.5% in this fiscal as against a contraction of 7.3% last year, as the ongoing recover is faster and more credible than earlier, according to a report by UBS Securities India. However, it added that the recent supply side restrictions, including high global commodity prices, especially oil and domestic coal shortages could weigh on the recovery. The economy will further gather momentum in the second half of the ongoing fiscal, but would slow down to 7.7% in the next financial year, it said.
Fiscal deficit at 6.3%
The Reserve Bank of India (RBI) had scaled down the growth to 9.5% in the current fiscal, though the government budgeted for a 10.5% growth. Due to the pandemic’s ravage, the economy took a beating to 7.3% this fiscal, which was the worst and the third contraction on record.
It also expects real GDP growth in FY 22 and FY 23 to be well above the consensus forecast, but did not give a number.
From a fiscal perspective, the report estimates the consolidated deficit to narrow to 9.8% of GDP in the current year from 13.4% in FY21.
The centre is also likely to register a lower fiscal deficit this year at 6.3%, but a marginally higher deficit for states at 3.5%.
The report attributed the lower fiscal deficit to cyclical economic recovery boosting revenue collection and the roll back of relief measures related to the pandemic.
The report is done on the basis of a survey among the key policymakers who are more optimistic now and expect the real GDP growth to surprise well on the upside.