Economic Survey 2021: Recovery Past Pre-Covid Levels In Two Years 
Yulu Bikes Pvt. ride-sharing bicycles stand parked at Connaught Place in New Delhi. (Photographer: Ruhani Kaur/Bloomberg)

Economic Survey 2021: Recovery Past Pre-Covid Levels In Two Years 

The rebound in economic activity and the government’s structural reforms is expected to push the Indian economy past its pre-Covid level in two years, according to the Economic Survey 2021.

After an estimated 7.7% pandemic-driven contraction in FY21, India’s real GDP is projected to record a growth of 11% in FY22, while nominal GDP is projected to grow by 15.4%, according to the survey for 2020-21 published on Friday. “These conservative estimates reflect upside potential that can manifest due to the continued normalisation in economic activities as the rollout of Covid-19 vaccines gathers traction.”

This path, with 11% real GDP growth in FY22, would entail a growth of 2.4% over the absolute level of FY20, implying that the economy would take two years to reach and go past the pre-pandemic level.

The survey estimates the real GDP to grow at its trend rate of 6.5% in FY23 and 7% in FY24, aided by structural reforms.

  • Supply-side push from reforms and easing of regulations;
  • Push to infrastructural investments.
  • Boost to manufacturing sector through the productivity-linked incentive schemes.
  • Recovery of pent-up demand for services sector.
  • Increase in discretionary consumption subsequent to rollout of the vaccines, pick up in credit given adequate liquidity and low interest rates.

Other Highlights

  • Starting July, a resilient V-shaped recovery is underway, as demonstrated by the recovery in GDP growth in Q2 after the sharp decline in Q1, a sustained resurgence in high-frequency indicators such as power demand, E-way bills, GST collection, steel consumption.
  • Faster normalisation of business activities amid gradual lifting of restrictions, higher festive and pent-up demand and policy support is expected to translate into a faster-than-anticipated economic recovery over the second half.
  • On the demand side, the recovery is expected to be broad-based in the second half of the ongoing financial year. The biggest growth driver is likely to be government consumption that is expected to rise at a strong 17% annually in the second half as against a 3.9% contraction the the first half.
  • With a gradual recovery of economic activity, both imports and exports have picked up and net exports are expected to re-enter the negative territory in the second half. Exports are expected to decline by 5.8% and imports by 11.3% in the second half of the year.
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