The ONS forecast did not take into account the impact of the ongoing Omicron-induced surge in cases
The National Statistics Office’s first advance estimates of economic output for the current fiscal year are optimistic forecasts that highlight some positive trends as well as areas of concern that may derail the growth momentum. The NSO has projected real GDP for the 12 months ending March 2022 at 147.54 lakh-crore, an increase of 9.2% from the preliminary estimate of 135.13 lakh-crore for the last fiscal year, when the full fury of the COVID-19 pandemic caused production to contract 7.3%. At this rate, the Indian economy would regain its preeminence as the world’s fastest growing large economy. A key pillar of this growth assumption is the optimistic outlook for net tax revenue on products, which the ONS expects to increase by 16.2%, after declining by 18.4% in the previous period. Gross value added, which brings together production in the different sectors of the economy, is expected to grow by 8.6% year-on-year thanks to the good performance of the agricultural sector and an encouraging double-digit rebound (12.5%) Manufacturing. However, compared to the pre-pandemic FY2020 GVA, the projected production of 135.2 lakh-crore is just ₹ 2.5 lakh-crore, or 1.9%, clearly indicating that the economy has a long way to go before it can regain the growth momentum needed to create more jobs and help reduce worsening income inequalities.
Tellingly, the ONS forecast, which is based on varied data spanning the first six to eight months of the current fiscal year, did not take into account the impact of the Omicron-induced continuing outbreak in case of COVID-19. After all, anyone can guess how badly the current wave could strike already fragile supply chains, consumer demand, and contact-intensive services. Indeed, private final consumption expenditure, which two years ago represented nearly 60% of GDP, is still struggling to recover from the crushing compression it suffered during the first full year of the pandemic, when ‘it fell by 9.1%. While the NSO postulates that consumer spending will increase by 6.9% in this fiscal year, the assumed figure is still 2.9% below the FY2020 level. omnibus service category which encompasses commerce, hotels, transport, communications and broadcasting and accounts for one fifth of GVA is expected to post a mere 11.9% expansion after declining 18.2% in the previous year . As a result, even without taking into account the impact of a third wave, this vital service sector would still be 8.5% behind its pre-pandemic production. Barely a few weeks away from the Union budget, political decision-makers have a clear choice to make: introduce measures to support consumption and investment, even if it means loosening the purse strings, or risk seeing the growth momentum is running out of steam for lack of favorable winds.