According to the Economic Survey tabled in Parliament by Finance Minister Nirmala Sitharaman, the current financial year ending March 31 can contract by 7.7% and growth can be 11% in the next financial year. Coronavirus pandemic and the damage caused by nationwide lockdown to contain the virus spread is the reason behind the contraction in FY21 and
The survey unveiled two days before the Union Budget is broadly in line with forecasts by the Reserve Bank of India (RBI) which has said it expected the country's GDP to contract by 7.5 per cent in the year ending March 31.
Recently, the International Monetary Fund (IMF) projected the contraction in India's economy at 8 per cent in 2020-21, indicating a growth rate of 11.5% in 2021-22 before a decline to 6.8 per cent in 2022-23. The trend shows that in both years, India will again become the fastest-growing big economy in the world.
The GDP contracted by 23.9 per cent in the quarter that ended in June 2020, followed by a milder contraction of 7.5 per cent in the quarter ended September 2020.
"India was the only country to announce a slew of structural reforms to expand supply in the medium to long term and avoid long-term damage to productive capacities," said the survey.
"The upturn in the economy while avoiding the second wave of infections makes India a sui generis case in strategic policymaking amidst a once-in-a-century pandemic," the survey added.
The survey stated that "The primary deficit for FY21 is assumed to be 6.8 per cent of GDP. The primary deficit for FY22 is assumed to be 2.5 per cent of GDP.”
“The decreasing trajectory of the primary deficit is estimated to go up to 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 referred that the nominal interest rate is speculated to be 6 per cent.
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"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."