The National Statistical Office has released the first Advance Estimate for FY22.
Considering limited impact of the Covid wave the economic growth for the 2021-22 fiscal year is estimated at 9.2%.
Though growth points to 9.2% due to base effect the real growth estimated is only 1.3% over the pre-Covid GDP level.
The size of India’s economy is expected to increase to $3.2 trillion.
Nominal GDP is estimated to expand by 17.6% in FY22, higher than the 14.4% assumed in Budget 2021-22.
The estimate is the highest in nearly two decades.
Nominal growth is overtaking real growth by 8.4 percentage points due to a high implicit price deflator (IPD)-based inflation of 7.7%.
The agriculture sector continues to shine.
Manufacturing and construction have shown good growth.
The growth in agriculture and industry was higher than in 2019-20 (FY20).
Though the services sector grew it lags behind FY20.
Impact of subsequent covid waves on the revival of economy in 2022-23.
Continued supply-side rigidities.
Lowering of India’s export due to covid surge.
Higher nominal GDP than assumed provides additional expenditure space for the government.
This would reduce the debt-to-GDP ratio, which is the focus of FRBM.
Despite the shortfall in disinvestment proceeds and additional demand for supplementary grants, the fiscal deficit target of 6.8% of GDP is likely to be achieved.
Nominal GDP tells us the present-day value of a country’s goods and services. Here prices are affected by inflation since it uses current market prices.
Real GDP is not affected by inflation. Here nominal GDP is adjusted for inflation using GDP deflator to reflect changes in real output.
Hence real GDP growth reflects a country’s increased output and is not influenced by inflation increasing price level.
The GDP deflator, also called implicit price deflator, is a measure of inflation.
It is the ratio of the value of goods and services an economy produces in a particular year at current prices to that of prices that prevailed during the base year.
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