India will post strong economic recovery

India's path to economic recovery will be stronger than thought earlier as fiscal expansion and vaccine hopes help the country heal from COVID-19, it is learnt. The world's second-most populous country has begun a huge vaccination drive and a steep fall in new Coronavirus cases in the past few months is supporting a recovery in Asia's third-largest economy.

Alongside that, nearly 60 per cent of respondents, 18 of 31 who responded to an additional question in the Jan. 13-25 poll said that India's federal budget, due on Feb. 1, would help a significant economic recovery in financial year 2021/22 and has already sent stocks to record highs.

"We expect global economic activity to return to normality in fiscal Q2 and India to grow in fiscal 2021/22, with government stimulus packages expecting to contribute," said Hugo Erken, head of international economics at Rabobank.

"There is a strong sentiment the budget will aim to continue expenditure as growth is the only way India can come out of recent setbacks."

The poll of over 50 economists showed the economy would grow 9.5 per cent next fiscal year - the highest since polling began for the year in March 2020 - after contracting 8.0 per cent in the current fiscal year.

It was expected to grow 6.0 per cent in fiscal year 2022/23. The poll predicted the economy would grow 21.1 per cent, 9.1 per cent, 5.9 per cent and 5.5 per cent in each quarter of the 2021/22 fiscal year largely upgraded from a poll taken two months ago.

But when asked how long it would take for the economy to recover to its pre-COVID-19 level, 26 of 32 respondents said that it would take up to two years while six analysts said it would be longer than that. Twelve analysts said within a year.

The Reserve Bank of India which has slashed its main repo rate by 115 basis points since March 2020 to cushion the shock from the Coronavirus crisis was expected to keep its benchmark lending rate at 4.0 per cent through at least 2023.

India's government will focus on fiscal expansion in next week's budget and revise its borrowing target higher for the 2021/22 fiscal year prompted by the expected economic slowdown and weak jobs growth. Government borrowing has risen due to the spending in the pandemic while revenues have severely dampened.