India's GDP is estimated to contract by 7.7 per cent during the current fiscal, said the Economic Survey 2020-21 on Friday (29 January).
The document which was tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha in its debt simulations for worst-case debt analysis assumed the contraction at (-) 7.7 per cent.
Contrary to expectations of a faster growth in FY22 helping to shave off the sharp GDP contractions this year, the Indian economy will take at least two more years to return to the growth levels achieved in the pre-pandemic period, the Economic Survey 2020-21 said.
The projection on return of pre-pandemic growth is based on IMF projections of 11.5 per cent real GDP growth in 2021-22 and a 6.8 per cent growth in 2022-23. With these growth projections, Indians would once again return to become the fastest growing economy in the world.
The survey has projected that the country's real GDP in FY22 will grow by 11 per cent after an estimated contraction of 7.7 per cent during the current fiscal.
The survey said that Covid led to a once in a century global crisis in 2020. While the lockdown resulted in GDP contracting by 23.9 per cent in Q1 of FY21, the recovery has been V shaped thereafter, the survey noted.
The document prepared by the Finance Ministry's Chief Economic Adviser Krishnamurthy V Subramanian said general government debt for FY20 is taken as 73.8 per cent of the GDP.
"The primary deficit for FY21 is assumed to be 6.8 per cent of GDP... Primary deficit for FY22 is assumed to be 2.5 per cent of GDP.
"The declining trajectory of primary deficit is assumed to reach 1.5 per cent of GDP by FY24, and it is assumed to stay at 1.5 per cent thereafter," it added.
Besides, the survey cited that nominal interest rate is assumed to be 6 per cent.
"As on January 26, 2021, we estimate the weighted average cost of borrowing using the weights of general government borrowing across maturities to be 6 per cent.
"Inflation is taken as 5 per cent, i.e. mid-point of the range of 4 per cent - 6 per cent."
With IANS Inputs
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