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Thursday, December 2, 2021

Prime Minister’s Economic Advisory Council predicts real GDP growth to hover around 7.5% in fiscal year (22-23)

The council members looked beyond FY21-22 as they were optimistic about real and nominal growth prospects in the next fiscal year

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New Delhi: Members of the Prime Minister’s Economic Advisory Council (EAC-PM) met in New Delhi on Thursday and discussed the country’s GDP growth prospects.

Members of the Prime Minister’s Economic Advisory Council looked beyond the current fiscal year (FY21-22) as they were optimistic about real and nominal growth prospects for the next fiscal year (FY22-23).

In addition to an element of the base effect, the contact-intensive sectors and the construction market are expected to recover in fiscal years 22-23, according to the statement released by the board. Once capacity utilization improves, private investment is also expected to pick up. Therefore, members estimated that an actual growth rate of 7-7.5% and a nominal growth rate of over 11% in fiscal years 22-23 were likely.

However, this should not mean that the Union budget for fiscal years 22-23 should include unrealistic tax revenues or fiscal dynamism figures. The Union budget for the years 21-22 was applauded because of the reform measures, as well as the transparency and realism of the figures.

Members of the EAC-PM were of the view that these dimensions should also be carried over into the FY22-23 budget, signaling the use of additional revenues in the form of capital expenditures and human capital expenditures, since the pandemic of Covid-19 has led to a deficit in human capital. There should also be a clear road map for privatization and the growth orientation of last year’s budget should also be maintained.

The Reserve Bank of India (RBI) in June this year announced a series of liquidity measures, including a liquidity window of Rs 15,000 crore for contact-intensive sectors like hospitality and tourism, a special liquidity facility of Rs 16,000 crore at SIDBI, securities purchases of Rs 40,000 crore and an increase in borrower coverage under the resolution framework by increasing the maximum exposure limit from Rs 25 crore to Rs 50 crore for MSMEs, small businesses and personal loans for business purposes.

Under the contact-intensive program, banks can provide new lending support to hotels and restaurants; tourist travel agents, tour operators and adventure / heritage facilities, ancillary aviation services, ground handling and supply chain assistance, and other services that include private bus operators, car repair services, service providers car rental services, event planners, spas, and beauty salons, and salons. These areas have been hit by lockdowns amid the raging pandemic.

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