Prospects for Economic Growth in 2022-23 – UPSC GS3

Basic Determinants of Economic Growth for 2022-23:
Determinant of Growth
Analysis of 2021-22
Prospects for Economic Growth 2022-23
Capacity  utilization
Capacity  utilization ratio was only 61.7% in the preceding four quarters of 2021-22.
Capacity  utilization in India continues to show considerable slack.
Gross Fixed  capital formation (GFCF)
The gross fixed  capital formation (GFCF) relative to GDP at current prices stands at 29.6% in  2021-22.
Meeting the GFCF  target could be challenging given that private sector investment is still  weak due to continued uncertainty over the pandemic.
Private final  consumption expenditure (PFCE)
PFCE shows a low  growth of 6.9% in 2021-22.
PFCE is estimated  to drop by 2.9% from the pre-pandemic level, even though growth in FY22 had  remained below par.
Real-GDP growth
India’s GDP will  grow at 9.2 per cent in the financial year 2021-22 (FY22) as against a  contraction of 7.3 per cent in the previous financial year.
Growth in 2022-23  could continue to be constrained by supply-side bottlenecks and high prices  of global crude and primary products. It may thus be prudent to expect a real  GDP growth in the range of 6%-7%.
Nominal GDP Growth
Implicit price  deflator (IPD)-based inflation  was as high as 7.7% in 2021-22.
The nominal GDP is  estimated to be higher by almost 4.2% from the budget estimate for FY22.
Fiscal Deficit
The annual growth  in the Center’s GTR may be close to 35%, implying a buoyancy of nearly 2.  With these buoyant tax revenues, the Government may be able to limit the  2021-22 fiscal deficit to its budgeted level of 6.8% of GDP.
ICRA estimates the  GoI’s fiscal deficit at 5.8 percent of the GDP in FY23.
New Factors:
  • Corporate income tax (CIT) reform: The major corporate income tax (CIT) reform undertaken in 2019-20 had provided a concessional CIT rate of 15% for fresh investment in manufacturing by domestic companies provided their production took off on or before March 31, 2023.
  • GST Compensation: – The GST compensation provision would also come to an end in June 2022. This would cause a major revenue shock at least for some States such as Tamil Nadu, Kerala and Andhra Pradesh.

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