India Pegs 11% GDP Growth in Fiscal 2022 Helped by Vaccine Drive

India’s government sees the economy expanding 11% in the year starting April, helped by vaccine drives to tame the coronavirus outbreak and aided by low interest rates that will spur business activity.

The rebound will follow an estimated 7.7% contraction in gross domestic product in the year ending March, according to the Economic Survey -- an annual report card on the economy -- tabled in Parliament by Finance Minister Nirmala Sitharaman Friday.

The projection forms the basis of drawing up budget proposals which will be unveiled by Sitharaman on Feb. 1. The forecast for next year is in line with the International Monetary Fund’s estimate for 11.5% expansion, which will once again make India the fastest-growing major economy in the world ahead of China’s 8.1% pace.

While the government is likely to miss its fiscal deficit target of 3.5% of gross domestic product this year, the survey said there’s need for more sustained and calibrated measures to facilitate the process of economic recovery in the new fiscal year.

Prime Minister Narendra Modi’s administration is under pressure to shore up economic growth after the pandemic resulted in widespread job losses and pushed millions into poverty due to one of world’s strictest lockdowns that lasted nearly two months. A raft of reforms have been implemented since, including an incentive program to boost local manufacturing and tweak archaic labor laws to improve ease of doing business.

The survey sees headline inflation moderating going forward -- a development that could open up room for the central bank to resume monetary policy easing to complement fiscal measures to support the economy.

The Reserve Bank of India’s Monetary Policy Committee, which has been on pause mode after cutting interest rates by 115 basis points early last year, is due to review policy later next week.

The government separately approved the roll out of vaccines this month to stem still rising infections across the nation of more than 1.3 billion people. Besides, the administration has ensured a step up in spending to reverse the growth contraction and there has been a significant increase in capital expenditure in the three months ended Dec. 31, the survey showed.

©2021 Bloomberg L.P.

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