Bright crop prospects will boost rural demand, says NITI Aayog

Record kharif output and bright prospects for the rabi crop will boost rural demand, which in turn will help in economic growth exceeding 10 per cent in 2021-22, the NITI Aayog has said.

This will spur a revival in the manufacturing sector with improving capacity utilisation by firms in the coming months, Vice-Chairman Rajiv Kumar said in the think tank’s latest publication, ArthNITI. His GDP growth projections are higher than the 9.5 per cent given by the Reserve Bank of India’s monetary policy committee.

In his foreword to the publication, Kumar said a significant increase in exports would boost growth and employment while a gradual pickup in contact-intensive services was likely to support the growth momentum.

On the major challenges, he said inflation was emerging as a key risk to sustainable global economic recovery with supply-chain constraints and rising energy prices.

“Crude oil (Brent) price at above $85 per barrel (October 2021) has risen over 60 per cent in 2021 despite the decision by OPEC plus (July 2021) to boost output till April 2022. The World Bank (October 2021) forecasts that energy prices are expected to average more than 80 per cent higher in 2021 y/y and will remain elevated in 2022, adding to global inflationary pressure and potentially shifting economic growth to energy-exporting countries from energy importing ones,” Kumar said. 

The consumer price index (CPI) fell to 4.3 per cent in September 2021, the lowest since April 2021. Sharply decelerating food prices have eased headline inflation closer to the midpoint of the RBI’s target.

“Trade growth is rebounding strongly, with much stronger imports than exports, reflecting India’s robust economic recovery,” the vice-chairman said.

He said India sustained its pace of economic recovery in September 2021 as reflected by acceleration in the manufacturing PMI at 53.7 in September (52.3 in August 2021), offset by a modest deceleration in the services PMI at 55.2 (56.7 in August 2021).

Other key high frequency indicators — power consumption, railway freight, goods and services tax collection, e-way bills, etc — also showed a continued pickup.

The index of industrial production (IIP) witnessed growth of 11.9 per cent in August 2021 with core sector output growth of 11.6 per cent, reflecting strong activity in the industrial and infrastructure sectors.

On the Centre’s finances, he said higher than expected revenue trends, driven by both direct and indirect taxes, had provided the much-needed fiscal space for required policy action. 

He said India achieved the landmark milestone of administering 1 billion Covid-19 vaccine doses on October 21 and the rapid vaccination drive across the country would ensure that the risk of future waves was minimised.