Nominal GDP to grow at 19%in FY22: Govt

India’s economy is likely to rebound 19% in the next fiscal without adjusting for inflation after recording what economists estimate will be the deepest contraction in the country’s history in the prior year, according to the finance ministry’s estimates.

It is a bit more modest than some optimistic estimates that the Fifteenth Finance Commission has received from experts, the Commission’s chairman, NK Singh, said in an interview, citing a presentation made by the finance ministry’s chief economic adviser, Krishnamurthy Subramanian.

“We had to make projections about the rebound from a very low base year. The chief economic adviser said in a presentation that it could go as high as 19%, while some even said it could be 21% as an extreme case, and others said it could be more modest,” said Singh.

Economists, however, warned that while the rebound in FY22 may look strong, the gross domestic product may still be behind what was recorded in the year ended March 31, which was estimated to be Rs 203.4 lakh crore by the National Statistical Office.

“One big determinant of return to normal economic activity is the discovery of an effective vaccine and mass inoculation,” said DK Joshi, chief economist at Crisil Ltd. “Our expectation is 10% real GDP growth for FY22 over a 9% contraction in current fiscal,” said Joshi.

In a separate interview last week, Subramanian said though the pandemic may have an adverse impact on the Indian economy for some quarters, ultimately, India will get back to a high-growth trajectory due to the structural reforms it is undertaking. “When you take into account some of the reforms that have been done on the agriculture side, on labour, on privatisation, all this together will increase productivity in the economy and will help bring back growth,” he said.

The finance ministry has, however, not disclosed its GDP estimates for the current financial year but most forecasters are now projecting a GDP contraction of more than 10%.

In a statement placed in Parliament on Friday, the finance ministry said it is not able to submit a medium term expenditure framework with rolling targets of indicative expenditure for FY22 and FY23 as mandated under the FRBM Act because it is not possible to obtain reliable projections of GDP growth at this time due to the continuing impact of the Covid-19 pandemic on the Indian economy.