NEW DELHI, Jan 29 (Reuters) - India forecast robust economic growth of 11% for the coming fiscal year on Friday in its annual economic survey, after a massive COVID-19 vaccination drive and a rebound in consumer demand and investments.
The Indian economy, which the International Monetary Fund singled out as a global bright spot only a few years ago, is set to contract 7.7% in the current fiscal year to March 31, its worst performance in four decades, the government said in its report.
But it predicts the rollout of vaccines against COVID-19, which has killed 153,847 Indians, will re-energise Asia’s third-largest economy next year, putting it on track to post the strongest growth since India liberalised its economy in 1991.
The survey’s projections form the basis for key figures in the budget, due to be delivered on Monday by Finance Minister Nirmala Sitharaman.
While the survey forecast a “V-shaped” economic recovery, it also cautioned that it would take at least two years to regain pre-pandemic levels.
“With the economy’s returning to normalcy brought closer by the initiation of a mega vaccination drive, hopes of a robust recovery in services sector, consumption, and investment have been rekindled,” said the survey.
India has started inoculating millions of people with two vaccines - Serum Institute from India’s COVISHIELD, licensed from Oxford University and AstraZeneca, and COVAXIN, developed domestically by Bharat Biotech and the Indian Council of Medical Research.
Despite the optimistic outlook, officials say Sitharaman may have to make tough choices to the government’s ballooning debt in check while presenting a spending plan able to lift the economy.
Chief Economic Adviser Krishnamurthy Subramanian, who wrote the economic report told a news conference, that reforms can speed up the economic recovery.
The government’s attempt to open up the country’s vast agriculture sector to private players has set off mass protests by farmers, prompting an offer by the government to suspend its implementation for 18 months.
“Reforms must go on to enable India to realize its potential growth and erase the adverse impact of the pandemic,” Subramanian said.
India must also step up health spending from the current 1% of gross domestic product, one of the lowest for a major economy, to 2.5 to 3%, he said. (Reporting by Aftab Ahmed and Manoj Kumar; additional reporting by Nidhi Verma and Neha Arora; editing by Euan Rocha, Sanjeev Miglani, Larry King)