Rise in the government spending, better performance from the agriculture sector and the flattening COVID-19 curve have put India on the path of economic recovery in FY2021-22. S&P Global Ratings estimates this growth at 10 percent in FY22.

The global rating company also mentioned that stronger-than-expected recovery of corporate earnings after the pandemic-related disruption, improved GST receipts, mobility trends showing driving in India has all surpassed pre-pandemic levels. S&P said that these and several high-frequency indicators such as PMIs point towards positive near-term prospects.

S&P also said that an increase in commodity prices and a revival of domestic demand after the easing of lockdown have brought upside earnings surprises while changing consumer choices such as the preference for personal transport for health-safety reasons, have helped industries. Automobiles is one of them.

It also said that India needs many things to be right for its recovery to continue, and the need to quickly and thoroughly vaccinate 1.4 billion people is of prime urgency.

The agency said, “Emergence of more contagious COVID-19 variants with the potential to evade vaccine-derived immunity pose a major risk to the country’s recovery”. It further added that the possibility of early withdrawal of global fiscal stimulus also poses a major risk to India’s recovery.

Despite this, S&P is positive about India’s near-term prospects while the recent Union Budget 2021-22 will also support the economic recovery. It said, “We expect the speed of India’s post-crisis recovery to have important implications for the sovereign credit rating. This includes the sustainability of the government’s strained fiscal position”.

The agency said that the nominal GDP will only return to its fiscal 2020 full-year output in fiscal 2022, even if the real GDP growth meets or modestly surpasses its 10 percent growth expectation. Its FY22 forecast is a notch below the 11 percent growth mark that the Economic Survey has projected for the year.