Most agencies underestimating India's growth in FY22: Sanjeev Sanyal

Principal Economic Advisor Sanjeev Sanyal believes that most agencies have underestimated economic growth of India for the fiscal year 2021-22.

"I think people have underestimated the growth for 2021-22. Most forecasts which I have seen underestimated (GDP growth rate for FY22)," Sanyal told Business Standard. He exuded confidence that most agencies would upgrade their forecast next year.

"When they do it, they will say that it was due to low base but the base is known. So you should hold them to it when they do it," he said. 

He said the finance ministry's projections for the current fiscal year are in line with the Reserve Bank of India’s (RBI’s) forecast. The RBI projected the economy to contract 9.5 per cent during 2020-21, with a 9.8 per cent decline in the second quarter and a 5.6 per cent shrinkage in the third, before 0.5 growth in the fourth quarter. 

The economy fell unprecedented 23.9 per cent in the first quarter.

 The RBI also projected the economy to grow 20.6 per cent in the first quarter of the next fiscal year.

Finance Minister Nirmala Sitharaman on Tuesday had said India may become one of the fastest-growing large economies during the next financial year. 

India's economy had been the fastest-growing large economy, but of late it was overtaken by China. In 2019-20, India's economy grew 4.2 per cent, while the Chinese economy expanded 6 per cent in CY19. Against the expected contraction of India's economy in FY21, the IMF projected China's economy to grow 1.9 per cent in CY20.

India's economic growth, according to the Fund, is projected to overtake China’s next year as the former is predicted to grow at 8.8 per cent and the latter at 8.2 per cent.

The World Bank projected India's economy to decline 9.6 per cent in the current financial year, but said the economy is likely to rebound to 5.4 per cent growth in FY22, mostly reflecting base effects, assuming the Covid-related restrictions cease to exist by then.

According to Asian Development Bank, the Indian economy will fall 9 per cent this financial year, but bounce back with 8 per cent growth FY22, as the country begins to emerge from the economic devastation caused by the Covid-19 pandemic.