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State of the Economy 2020-21: A Macro View 47

the fundamentals of the economy - which should put the economy on a strong growth path
once the economy recovers from the pandemic shock. These need to be sustained to bolster the
Indian economy to reach its potential growth. The policy emphasis has also been on expansion
of public investment which would crowd in private investment. Attempts on deregulation
and liberalisation of sectors are aimed at improving the business environment to unlock
entrepreneurial energies and increase the risk appetite of private investors. The private sector
needs to partner the Government in minimising the disruptive impact of the pandemic on the
Indian economy.

OUTLOOK
1.61 After an estimated 7.7 per cent pandemic-driven contraction in 2020-21, India’s real GDP
is projected to record a growth of 11.0 percent in 2021-22 and nominal GDP by 15.4 per cent.
These conservative estimates reflect upside potential that can manifest due to the continued
normalisation in economic activities as the rollout of Covid-19 vaccines gathers traction. This
will further be supported by supply-side push from reforms and easing of regulations, push
to infrastructural investments, boost to manufacturing sector through the Productivity Linked
Incentive Schemes, recovery of pent-up demand for services sector, increase in discretionary
consumption subsequent to roll-out of the vaccine and pick up in credit given adequate liquidity
and low interest rates. This path would entail a growth in real GDP by 2.4 percent over the
absolute level of 2019-20 – implying that the economy would take two years to reach and go
past the pre-pandemic level (Figure 47). These projections are in line with IMF estimate of real
GDP growth of 11.5 per cent in 2021-22 for India and 6.8 per cent in 2022-23. India is expected
to emerge as the fastest growing economy in the next two years as per IMF.

Figure 47: Projections of Real GDP for 2021-22

Source: NSO and Survey Calculations

1.62 The new year has dawned with the approval of long-awaited Covid-19 vaccine and initiation
of vaccination drives in various countries. With the approval of two indigenously manufactured