Basic Determinants of Economic Growth for 2022-23:
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Determinant of Growth
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Analysis of 2021-22
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Prospects for Economic Growth 2022-23
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Capacity utilization
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Capacity utilization ratio was only 61.7% in the preceding four quarters of 2021-22.
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Capacity utilization in India continues to show considerable slack.
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Gross Fixed capital formation (GFCF)
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The gross fixed capital formation (GFCF) relative to GDP at current prices stands at 29.6% in 2021-22.
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Meeting the GFCF target could be challenging given that private sector investment is still weak due to continued uncertainty over the pandemic.
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Private final consumption expenditure (PFCE)
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PFCE shows a low growth of 6.9% in 2021-22.
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PFCE is estimated to drop by 2.9% from the pre-pandemic level, even though growth in FY22 had remained below par.
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Real-GDP growth
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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.
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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%.
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Nominal GDP Growth
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Implicit price deflator (IPD)-based inflation was as high as 7.7% in 2021-22.
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The nominal GDP is estimated to be higher by almost 4.2% from the budget estimate for FY22.
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Fiscal Deficit
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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.
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ICRA estimates the GoI’s fiscal deficit at 5.8 percent of the GDP in FY23.
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New Factors:
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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.
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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.