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Credit rating agency ICRA in its latest report has said with decline in number of fresh COVID-19 cases and easing of restrictions, the country's gross domestic product (GDP) will grow at 8.5 percent in FY2021-22. It expects the gross value added (GVA) at basic prices (at constant 2011-12 prices) to grow at 7.3 per cent in FY2022. It also said if vaccine coverage is accelerated following the re-centralised procurement policy, the GDP expansion in FY2022 may be as high as 9.5 percent, with a widening upside in Q3 and Q4 of FY2022.

The agency has taken into account the likely higher outgo towards food subsidies by the government in FY2022, relative to the budgeted level, following the decision to provide free food grains in May-November 2021. It has excluded the impact of the release of food subsidy arrears in FY2021, based on the clarification provided by the National Statistical Office (NSO). The monthly pattern of subsidy release by the government cannot be ascertained at present. Therefore, it cautions that the quarterly trend in GDP growth could differ from our baseline assumption (+14.9 per cent in Q1, +8 per cent in Q2, +5.6 per cent in Q3 and +7 per cent in Q4 of FY2022), based on when the subsidy pay-out is booked. It also expects a prolonged negative impact of the second wave on consumer sentiment and demand, with healthcare and fuel expenses eating into disposable income, and less pent-up/replacement demand in FY2022 relative to FY2021. 

Notwithstanding the expectation of a normal monsoon buffering the prospects for crop output and less reverse migration in 2021 compared to 2020, ICRA expects the combination of the sharp rise in rural infections, loss of employment as well as remittances to weaken the rural sentiment and demand. After the satiation of the pent-up demand seen during the festive season in 2020, purchases of consumer durables may be restricted, which would impact capacity utilisation in FY2022.