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Care Ratings in its latest report has said that India’s gross domestic product (GDP) growth is likely to be 8.8 to 9 percent in the current financial year (FY22), driven by agriculture and industry sectors. The country's economy had contracted by 7.3 per cent in fiscal 2020-21. It said the outlook for the Indian economy on almost all counts in FY22 would look seemingly better than FY21 on account of the negative base effect.

According to the report, services sector will not be able to reach its potential even at 8.2 per cent growth as the second lockdown has affected sectors like hotels and restaurants, tourism, retail malls and entertainment in particular. While a lot has been done on the supply side by both the RBI and the government, the malaise is on the demand side which has been a problem even before the pandemic. It said a critical factor this time will be the spending pattern of the rural households and added that the monsoon forecast is good and ideally a stable Kharif harvest should bode well for rural incomes.

The report also said the fiscal deficit for FY22 is projected between Rs 17.38 lakh crore to Rs 17.68 lakh crore. For a nominal GDP of Rs 222.9 lakh crore, it said the increase in quantum of fiscal deficit would potentially push up the fiscal deficit ratio to 7.8-7.9 per cent of GDP. It also said the cost of services has increased across all components, which combined with the fuel-led impact would keep CPI (consumer price index-based inflation) elevated at around 6 per cent by March-end.