Covid-Hit Indian Economy To Witness Rapid Recovery Due To Budgetary Measures, Vaccination Drive: Economists

A poll of economists by Reuters showed that the economic recovery of India will be stronger than previously thought, reports LiveMint.

The poll consisting of around 50 economists opined that the economy would grow 9.5 per cent next fiscal year with the help of fiscal expansion and vaccination drive, after contracting 8.0 per cent in the current fiscal year.

"We expect global economic activity to return to normality in the second quarter and India to grow in fiscal 2021/22, with government stimulus packages expecting to contribute. There is a strong sentiment the budget will aim to continue expenditure as growth is the only way India can come out of recent setbacks,” Hugo Erken, head of international economics at Rabobank said.

However, the majority of the respondents in the survey have opined that it would take up to two years for the economy to recover to its pre-COVID19 level.

"There is a lack of fiscal space to boost growth sufficiently and India is unlikely to reach its pre-COVID-19 levels any time soon despite policy support. Economic momentum will struggle to gain traction as there are fears of stagflation and the possible end of monetary policy easing,” said Sher Mehta, director at Virtuoso Economics.

Also the economists have opined that the upcoming budget’s focus would be more on fiscal expansion than prudence.

"Tight fiscal policy can do lasting damage by hurting potential growth that would have been negatively affected on account of the pandemic," said Abhishek Upadhyay, senior economist at ICICI Securities PD.

Recently on Tuesday (26 January), the International Monetary Fund (IMF) too in its World Economic Outlook (WEO) update projected that India's economic growth will surpass all the major global economies in the next fiscal year.

According to the IMF, India is the only country expected to witness a double digit growth of 11.5 per cent next year. The trend will continue in FY23, with Indian economy expected to witness 6.8 per cent rise, highest among all major economies.