What’s your outlook for the current fiscal?
I expect real growth in 2021-22 to be at least 11%. GST collections, electricity consumption, broader consumption, mobility indicators — all of these show recovery. Also, consider something like IPO filings. There are two parts to the argument: one, decline in GDP was because of the lockdown and once the lockdown was eased, recovery was inevitable; and two, the second wave and the lockdown were completely different in nature from the first wave. Given the Q1 numbers, some forecasters have revised their real growth projections upwards, to those double-digit figures. The criticism now being advanced is about the absolute level, not the rate of growth. While this is true, one should note that all of that 20.1% growth in Q1 is not because of a low base in the preceding year.
Won’t sectors such as travel and tourism continue to be impacted because of an impending third wave?
Consider the vaccination numbers India has achieved till the end of August 2021. Not very long ago, international media had said such targets were impossible for a ‘poor country’ like India to achieve. Given such vaccination numbers, the adverse economic effect of a third wave will be much more limited. No such third wave will warrant the kind of lockdown we witnessed during the first wave. Given the geographical diversity, the nature and timing of the third wave will also vary from state to state. For instance, right now, most cases are from Kerala. Therefore, one shouldn’t even categorically state that there will be a third wave everywhere. It is obvious that any contact-intensive sector, like tourism or hotels, will suffer longer. This is a global phenomenon.
When will big private investments start coming in?
Growth is driven by four components — consumption, investments, government expenditure and net exports. During the second wave, compared with the first wave, net exports have done well and consumption and IPOs have picked up. Investment has a sectoral angle and that is a function of whether excess capacity exists. The answer also depends on whether one has in mind greenfield investments. There are sectors where investments are already happening. Many reforms introduced by the government make factor markets efficient. These work with a time lag, extended by the epidemic. Stated simply, across the board, private investments should recover towards the second half of 2022-23.