New Delhi: India’s economic recovery from the pandemic shock has been sustained in FY22 and the momentum is expected to continue broadly through the current FY23, but with downside risks from the shock geopolitics and its fallout, said the RBI’s annual report for 2021-22 released on Friday.
Despite the risks, the report says the recovery is “taking root and broadening”, and the Union budget for FY22 laid out the roadmap for “India at 100”, putting the emphasis on demand-side measures.
Substantially increasing public capital expenditure could attract private investment and “propel a virtuous circle, thereby improving aggregate demand”.
In addition, the National Infrastructure Plan (NIP) amounting to Rs 100 lakh crore and the National Monetization Pipeline (NMP) involving Rs 6 lakh crore – both slated to be completed by FY25, are expected to also give a major boost to infrastructure spending, he added. .
“The emphasis on supply management through “process reforms”, facilitating the smoothing and simplification of processes in certain sectors where the presence of government as a facilitator or regulator is necessary, would contribute to improving the resilience of the Indian economy”.
Overall consumer and business confidence remains resilient despite the third wave thanks to the accelerating pace of vaccination and better prospects for economic activity.
“A full recovery in aggregate demand, however, depends on a recovery in private investment. On the supply side, there is a resurgence in the mining and manufacturing sectors. The services sector, which has felt the brunt of the pandemic, has seen a broad recovery since Q2FY22. »
The report emphasizes labor market reforms to adapt to the pandemic by reskilling workers.
In financial markets during FY22, the report said ample liquidity and accommodative monetary policies in major economies pushed financial asset prices to all-time highs. The market was also supported by stimulus packages and the easing of restrictions imposed by Covid-19.
Indian financial markets remained buoyant under easy liquidity conditions, although the severe second wave of the pandemic from April to May 2021 dampened sentiment. The equity market continued to post double-digit growth in FY22, in line with its global peers, with optimism over large-scale vaccine rollouts and the resumption of economic activity.
Notably, retail investors’ direct equity participation continued to rise, with 3.46 crore Demat accounts opened in FY22, compared to 1.42 crore opened the previous year. During the financial year, an average of 28.8 lakh Demat accounts were opened each month, which is higher than 11.8 lakh Demat accounts per month in the previous year and 4.2 lakh Demat accounts per month in 2019-2020, according to the annual report.