Economic Survey 2021 - Mr. Deepak Jasani, Head of Retail Research, HDFC Securities

According to the Economic survey 2020-21, India's economy will rebound by 11% in FY22 (nominal GDP by 15.4%), after a 7.7% contraction in the current fiscal, helped by continued normalisation of economic activities, covid-19 vaccination and a host of policy steps taken by the government. It has also hinted at continuation of fiscal expansionary stance. The expected recovery will result in buoyant tax collections and ensure a sustainable fiscal path over the medium term. The comfortable foreign exchange reserves give the much-needed space for enhanced domestic investments. It has also hinted at change in the base year for CPI and including new sources of price data in its calculation.

A larger fiscal deficit in FY22 (though smaller than FY21) is on the cards in the Budget due on Feb 01. This could spur economic growth, but create pressure on interest rates and inflation later. Reaction of the Sovereign rating agencies to the Budget proposals would be interesting to watch. Given the fact that countries all over the globe are following similar policies, it would be difficult for them to single out India for harsh comments/evaluation.

Source : Equity Bulls

Keywords