Highlights of Indian Economy

⇒ According to the Economic Survey 2021-22, Advance Estimates suggest that the Indian economy is expected to witness real GDP expansion of 9.2 % in 2021-22 after contracting in 2020-21. This implies that overall economic activity has recovered past the pre-pandemic levels.

⇒ Agriculture and allied sectors have been the least impacted by the pandemic and the sector is expected to grow by 3.9% in 2021-22 after growing 3.6 % in the previous year.

⇒ Advance estimates suggest that the GVA of Industry (including mining and construction) will rise by 11.8% in 2021-22 after contracting by 7% in 2020-21.

⇒ The Services sector has been the hardest hit by the pandemic, especially segments that involve human contact. This sector is estimated to grow by 8.2 % this financial year following last year’s 8.4 % contraction.

⇒ Total Consumption is estimated to have grown by 7.0% in 2021-22 with significant contributions from government spending.

⇒ With the vaccination programme having covered the bulk of the population, economic momentum building back and the likely long-term benefits of supply-side reforms in the pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5 % in 2022-23.

⇒ India’s balance of payments remained in surplus throughout the last two years. This allowed the Reserve Bank of India to keep accumulating foreign exchange reserves (they stood at US$ 634 billion on 31st December 2021). This is equivalent to 13.2 months of merchandise imports and is higher than the country’s external debt.

⇒ Vaccination is not merely a health response but is critical for opening up the economy, particularly contactintensive services. Therefore, it should be treated for now as a macro-economic indicator. Over the course of a year, India delivered 157 crore doses that covered 91 crore people with at least one dose and 66 crore with both doses.

⇒ Inflation has reappeared as a global issue in both advanced and emerging economies. India’s Consumer Price Index inflation stood at 5.6 % YoY in December 2021 which is within the targeted tolerance band. Wholesale price inflation, however, has been running in double-digits.

⇒ One of the reasons that the Indian economy is in a good position is its unique response strategy. Rather than pre-commit to a rigid response, Government of India opted to use safety-nets for vulnerable sections on one hand while responding iteratively based on Bayesianupdating of information. This “barbell strategy” was discussed in last year’s Economic Survey. A key enabler of this flexible, iterative “Agile” approach is the use of eighty High Frequency Indicators (HFIs) in an environment of extreme uncertainty.

⇒ Another distinguishing feature of India’s response has been an emphasis on supply-side reforms rather than a total reliance on demand management. These supplyside reforms include deregulation of numerous sectors, simplification of processes, removal of legacy issues like do ‘retrospective tax’, privatisation, production-linked incentives and so on.

⇒ Advance estimates suggest that GDP will record an expansion of 9.2 % in 2021-22. This implies that the level of real economic output will surpass the pre-COVID level of 2019-20.

⇒ Despite all the disruptions caused by the global pandemic, India’s balance of payments remained in surplus throughout the last two years. This allowed the Reserve Bank of India to keep accumulating foreign exchange reserves, which stands at US$634 billion on 31st December, 2021. As of end-November 2021, India was the fourth largest foreign exchange reserves holder in the world after China, Japan and Switzerland. A sizeable accretion in reserves led to an improvement in external vulnerability indicators such as foreign excha nge reserves to total external debt, short-term debt to foreign exchange reserves, etc.

⇒ The revenue receipts of the central government during April- November 2021 have gone up by 67.2 % (YoY), as against an estimated growth of 9.6 % in the 2021-22 Budget Estimates.

⇒ On account of a sustained revenue collection and a targeted expenditure policy by the Government of India, the fiscal deficit for April-November 2021 has been contained at 46.2% of Budget Estimates (BE) which is nearly one third of the proportion reached during the same period of the previous two years (135.1% of BE in April-November 2020 and 114.8% of BE in AprilNovember 2019).

⇒ The Sensex and Nifty scaled up to touch its peak at 61,766 and 18,477 on October 18, 2021. Among major emerging market economies, Indian markets outperformed its peers in April-December 2021.

⇒ The Gross Non-Performing Advances (GNPA) ratio (i.e. GNPAs as a %age of Gross Advances) and Net Non-Preforming (NNPA) ratio of Scheduled Commercial Banks (SCBS) continued to decline since 2018-19. GNPA ratio of SCBs decreased from 7.5 % at end-September 2020 to 6.9% at end-September 2021. NNPA ratio of SCBS also declined from 6 % at end of 2017-18 to 2.2 % at end-September 2021. Simultaneously, the Capital Adequacy Ratio has continued to improve since 2015-16. The Capital to risk-weighted asset ratio (CRAR) of SCBs increased from 15.84 % at end- September 2020 to 16.54% at end-September 2021 on account of improvement for both public and private sector banks.

⇒ In India, Consumer Price Index (CPI) inflation moderated to 5.2% in 2021-22 (April-December) from 6.6 % in the corresponding period of 2020-21. It was 5.6% (YoY) in December 2021, which is within the targeted tolerance band. The decline in retail inflation in 2021-22 was led by easing of food inflation. Wholesale Price Inflation (WPI), however, has been running in double-digits. The inflation in ‘fuel and power’ group of WPI was above 20% reflecting higher international petroleum prices.

⇒ As per Fourth Advance Estimates for 2020-21, total foodgrain production in the country is estimated at a record 308.65 million tonnes which is 11.15 million tonnes higher than that during 2019-20. The production of rice, wheat and coarse cereals has increased at compound annual growth rates (CAGR) of 2.7, 2.9 and 4.8 % respectively during last six years i.e. 2015-16 to 2020-21. The CAGR for pulses, oilseeds and cotton has been 7.9, 6.1 and 2.8 %, respectively during the same period. [Source: Economic Survey 2021-22]

⇒ According to the Economic Survey 2021-22, the growth of the industrial sector, in the first half of 2021-22, was 22.9% vis a vis the corresponding period of 2020-21 and is expected to grow by 11.8% in this financial year. The industrial performance has shown improvement as reflected in the cumulative growth of the IIP. During April-November 2021-22 the IIP grew at 17.4 % as compared to (-)15.3% in April-November 2020-21.

⇒ The gross value addition at constant prices (GVA) in the industrial sector grew at the compound annual growth rate (CAGR) of 4.53 % between 2011-12 and 2019-20 while total GVA grew by CAGR of 5.63% over the same period. The share of the industrial sector in the nominal GVA(at current prices) was 25.9 % in 2020-21.With the industrial sector recovering and expected to grow at 11.8%, as per advance estimates for 2021-22 by National Statistical Office, industry’s share is expected to increase to 28.2 %.

⇒ During the first half of 2021-22, the Services sector grew by 10.8 %. The recovery is more pronounced given the Gross Value Added (GVA) of Services crossed the prepandemic level in Q2 2021-22.

⇒ The overall Services sector GVA is expected to grow by 8.2 % in 2021-22, although the spread of Omicron variant brings in a degree of uncertainty for near term, especially in segments that require human contact.

⇒ During H1 2021-22, services exports grew by 21.6 %, deriving strength from global demand for software and IT services exports. India’s share in world commercial services exports increased to 4.1 % in 2020.

⇒ During the first half of 2021-22, the Services sector received over US$ 16.7 billion FDI accounting for almost 54% of the total FDI inflows into India.

⇒ The number of new recognised starups have increased to over 14,000 in 2021-22 from only 733 in 2016-17. As a result, India has become the third largest startup ecosystem in the world after the US and China.

⇒ A record 44 Indian startups have achieved unicorn status in 2021 taking the overall tally of unicorns in India to 83, most of these are in the services sector.

⇒ Services sector contributes over 50 % to India’s GDP. While Covid-19 pandemic has had an adverse impact on most sectors of the economy, the services sector has been the worst affected as its’ share in India’s GVA declined from 55% in 2019-20 to 53 % in 2021-22, As per the Advance Estimates of 2021-22

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