State of the Economy 2021-22 | RBI Grade B Phase 1 Preparation - Bank Exams PDF Download

 Page 1


CHAPTER
01
The last two years have been difficult for the world economy on account of the COVID-19 
pandemic. Repeated waves of infection, supply-chain disruptions and, more recently, 
inflation have created particularly challenging times for policy-making. Faced with these 
challenges, the Government of India’s immediate response was a bouquet of safety-nets 
to cushion the impact on vulnerable sections of society and the business sector. It next 
pushed through a significant increase in capital expenditure on infrastructure to build 
back medium-term demand as well as aggressively implemented supply-side measures to 
prepare the economy for a sustained long-term expansion. This chapter explains how this 
flexible and multi-layered approach is partly based on an “Agile” framework that uses 
feedback-loops, and the monitoring of real-time data. 
Advance estimates suggest that the Indian economy is expected to witness real GDP 
expansion of 9.2 per cent in 2021-22 after contracting in 2020-21. This implies that overall 
economic activity has recovered past the pre-pandemic levels. Almost all indicators 
show that the economic impact of the “second wave” in Q1 was much smaller than that 
experienced during the full lockdown phase in 2020-21 even though the health impact 
was more severe. 
Agriculture and allied sectors have been the least impacted by the pandemic and the 
sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the 
previous year. Advance estimates suggest that the GVA of Industry (including mining and 
construction) will rise by 11.8 per cent in 2021-22 after contracting by 7 per cent in 2020-
21. The Services sector has been the hardest hit by the pandemic, especially segments that 
involve human contact. This sector is estimated to grow by 8.2 per cent this financial year 
following last year’ s 8.4 per cent contraction. 
Total Consumption is estimated to have grown by 7.0 per cent in 2021-22 with significant 
contributions from government spending. Similarly, Gross Fixed Capital Formation 
exceeded pre-pandemic levels on the back of ramped up public expenditure on 
infrastructure. Exports of both goods and services have been exceptionally strong so far 
in 2021-22, but imports also recovered strongly with recovery in domestic demand as well 
as higher international commodity prices. 
State of the Economy
Page 2


CHAPTER
01
The last two years have been difficult for the world economy on account of the COVID-19 
pandemic. Repeated waves of infection, supply-chain disruptions and, more recently, 
inflation have created particularly challenging times for policy-making. Faced with these 
challenges, the Government of India’s immediate response was a bouquet of safety-nets 
to cushion the impact on vulnerable sections of society and the business sector. It next 
pushed through a significant increase in capital expenditure on infrastructure to build 
back medium-term demand as well as aggressively implemented supply-side measures to 
prepare the economy for a sustained long-term expansion. This chapter explains how this 
flexible and multi-layered approach is partly based on an “Agile” framework that uses 
feedback-loops, and the monitoring of real-time data. 
Advance estimates suggest that the Indian economy is expected to witness real GDP 
expansion of 9.2 per cent in 2021-22 after contracting in 2020-21. This implies that overall 
economic activity has recovered past the pre-pandemic levels. Almost all indicators 
show that the economic impact of the “second wave” in Q1 was much smaller than that 
experienced during the full lockdown phase in 2020-21 even though the health impact 
was more severe. 
Agriculture and allied sectors have been the least impacted by the pandemic and the 
sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the 
previous year. Advance estimates suggest that the GVA of Industry (including mining and 
construction) will rise by 11.8 per cent in 2021-22 after contracting by 7 per cent in 2020-
21. The Services sector has been the hardest hit by the pandemic, especially segments that 
involve human contact. This sector is estimated to grow by 8.2 per cent this financial year 
following last year’ s 8.4 per cent contraction. 
Total Consumption is estimated to have grown by 7.0 per cent in 2021-22 with significant 
contributions from government spending. Similarly, Gross Fixed Capital Formation 
exceeded pre-pandemic levels on the back of ramped up public expenditure on 
infrastructure. Exports of both goods and services have been exceptionally strong so far 
in 2021-22, but imports also recovered strongly with recovery in domestic demand as well 
as higher international commodity prices. 
State of the Economy
2 Economic Survey 2021-22
With the vaccination programme having covered the bulk of the population, economic 
momentum building back and the likely long-term benefits of supply-side reforms in the 
pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5 per 
cent in 2022-23. 
Nonetheless, the global environment still remains uncertain. At the time of writing, a new 
wave in the form of the Omicron variant was sweeping across the world, inflation had 
jumped up in most countries, and the cycle of liquidity withdrawal was being initiated 
by major central banks. This is why it is especially important to look at India’s macro-
economic stability indicators and their ability to provide a buffer against the above 
stresses. 
Despite all the disruptions caused by the global pandemic, India’s balance of payments 
remained in surplus throughout the last two years. This allowed the Reserve Bank of India 
to keep accumulating foreign exchange reserves (they stood at US$ 634 billion on 31
st
 
December 2021). This is equivalent to 13.2 months of merchandise imports and is higher 
than the country’s external debt. The combination of high foreign exchange reserves, 
sustained foreign direct investment, and rising export earnings will provide an adequate 
buffer against possible global liquidity tapering in 2022-23. 
The fiscal support given to the economy as well as to the health response caused the fiscal 
deficit and government debt to rise in 2020-21. However , a strong rebound in government 
revenues in 2021-22 has meant that the Government will comfortably meet its targets for 
the year while maintaining the support, and ramping up capital expenditure. The strong 
revival in revenues (revenue receipts were up over 67 per cent YoY in April-November 
2021) means that the Government has fiscal space to provide additional support if 
necessary. 
The financial system is always a possible area of stress during turbulent times. However, 
India’ s capital markets, like many global markets, have done exceptionally well and have 
allowed record mobilization of risk capital for Indian companies. More significantly, the 
banking system is well capitalized and the overhang of Non-Performing Assets seem to 
have structurally declined even allowing for some lagged impact of the pandemic. 
Vaccination is not merely a health response but is critical for opening up the economy, 
particularly contact-intensive services. Therefore, it should be treated for now as a 
macro-economic indicator. Over the course of a year, India delivered 157 crore doses 
that covered 91 crore people with at least one dose and 66 crore with both doses. The 
vaccination process for boosters and for the 15-18 year age group was also gathering 
pace at the time of writing. 
Inflation has reappeared as a global issue in both advanced and emerging economies. 
India’s Consumer Price Index inflation stood at 5.6 per cent YoY in December 2021 
which is within the targeted tolerance band. Wholesale price inflation, however, has been 
running in double-digits. Although this is partly due to base effects that will even out, 
Page 3


CHAPTER
01
The last two years have been difficult for the world economy on account of the COVID-19 
pandemic. Repeated waves of infection, supply-chain disruptions and, more recently, 
inflation have created particularly challenging times for policy-making. Faced with these 
challenges, the Government of India’s immediate response was a bouquet of safety-nets 
to cushion the impact on vulnerable sections of society and the business sector. It next 
pushed through a significant increase in capital expenditure on infrastructure to build 
back medium-term demand as well as aggressively implemented supply-side measures to 
prepare the economy for a sustained long-term expansion. This chapter explains how this 
flexible and multi-layered approach is partly based on an “Agile” framework that uses 
feedback-loops, and the monitoring of real-time data. 
Advance estimates suggest that the Indian economy is expected to witness real GDP 
expansion of 9.2 per cent in 2021-22 after contracting in 2020-21. This implies that overall 
economic activity has recovered past the pre-pandemic levels. Almost all indicators 
show that the economic impact of the “second wave” in Q1 was much smaller than that 
experienced during the full lockdown phase in 2020-21 even though the health impact 
was more severe. 
Agriculture and allied sectors have been the least impacted by the pandemic and the 
sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the 
previous year. Advance estimates suggest that the GVA of Industry (including mining and 
construction) will rise by 11.8 per cent in 2021-22 after contracting by 7 per cent in 2020-
21. The Services sector has been the hardest hit by the pandemic, especially segments that 
involve human contact. This sector is estimated to grow by 8.2 per cent this financial year 
following last year’ s 8.4 per cent contraction. 
Total Consumption is estimated to have grown by 7.0 per cent in 2021-22 with significant 
contributions from government spending. Similarly, Gross Fixed Capital Formation 
exceeded pre-pandemic levels on the back of ramped up public expenditure on 
infrastructure. Exports of both goods and services have been exceptionally strong so far 
in 2021-22, but imports also recovered strongly with recovery in domestic demand as well 
as higher international commodity prices. 
State of the Economy
2 Economic Survey 2021-22
With the vaccination programme having covered the bulk of the population, economic 
momentum building back and the likely long-term benefits of supply-side reforms in the 
pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5 per 
cent in 2022-23. 
Nonetheless, the global environment still remains uncertain. At the time of writing, a new 
wave in the form of the Omicron variant was sweeping across the world, inflation had 
jumped up in most countries, and the cycle of liquidity withdrawal was being initiated 
by major central banks. This is why it is especially important to look at India’s macro-
economic stability indicators and their ability to provide a buffer against the above 
stresses. 
Despite all the disruptions caused by the global pandemic, India’s balance of payments 
remained in surplus throughout the last two years. This allowed the Reserve Bank of India 
to keep accumulating foreign exchange reserves (they stood at US$ 634 billion on 31
st
 
December 2021). This is equivalent to 13.2 months of merchandise imports and is higher 
than the country’s external debt. The combination of high foreign exchange reserves, 
sustained foreign direct investment, and rising export earnings will provide an adequate 
buffer against possible global liquidity tapering in 2022-23. 
The fiscal support given to the economy as well as to the health response caused the fiscal 
deficit and government debt to rise in 2020-21. However , a strong rebound in government 
revenues in 2021-22 has meant that the Government will comfortably meet its targets for 
the year while maintaining the support, and ramping up capital expenditure. The strong 
revival in revenues (revenue receipts were up over 67 per cent YoY in April-November 
2021) means that the Government has fiscal space to provide additional support if 
necessary. 
The financial system is always a possible area of stress during turbulent times. However, 
India’ s capital markets, like many global markets, have done exceptionally well and have 
allowed record mobilization of risk capital for Indian companies. More significantly, the 
banking system is well capitalized and the overhang of Non-Performing Assets seem to 
have structurally declined even allowing for some lagged impact of the pandemic. 
Vaccination is not merely a health response but is critical for opening up the economy, 
particularly contact-intensive services. Therefore, it should be treated for now as a 
macro-economic indicator. Over the course of a year, India delivered 157 crore doses 
that covered 91 crore people with at least one dose and 66 crore with both doses. The 
vaccination process for boosters and for the 15-18 year age group was also gathering 
pace at the time of writing. 
Inflation has reappeared as a global issue in both advanced and emerging economies. 
India’s Consumer Price Index inflation stood at 5.6 per cent YoY in December 2021 
which is within the targeted tolerance band. Wholesale price inflation, however, has been 
running in double-digits. Although this is partly due to base effects that will even out, 
3 State of the Economy
India does need to be wary of imported inflation, especially from elevated global energy 
prices. 
Overall, macro-economic stability indicators suggest that the Indian economy is well 
placed to take on the challenges of 2022-23. One of the reasons that the Indian economy 
is in a good position is its unique response strategy. Rather than pre-commit to a rigid 
response, Government of India opted to use safety-nets for vulnerable sections on one 
hand while responding iteratively based on Bayesian-updating of information. This 
“barbell strategy” was discussed in last year’s Economic Survey. A key enabler of this 
flexible, iterative “Agile” approach is the use of eighty High Frequency Indicators (HFIs) 
in an environment of extreme uncertainty. 
Another distinguishing feature of India’s response has been an emphasis on supply-side 
reforms rather than a total reliance on demand management. These supply-side reforms 
include deregulation of numerous sectors, simplification of processes, removal of legacy 
issues like ‘retrospective tax’, privatisation, production-linked incentives and so on. These 
have been discussed in detail in the respective chapters. Even the sharp increase in capital 
spending by the Government can be seen both as demand and supply enhancing response 
as it creates infrastructure capacity for future growth. This year’s Survey particularly 
highlights the importance of process reforms in a number of sectors while Chapter 11 
provides a brief demonstration of the use of satellite images and geo-spatial data, both 
recently deregulated sectors, for gauging economic development. 
INTRODUCTION
1.1 Two years into the COVID-19 pandemic, the global economy continues to be plagued 
by uncertainty, with resurgent waves of mutant variants, supply-chain disruptions, and a return 
of inflation in both advanced and emerging economies. Moreover, the likely withdrawal of 
liquidity by major central banks over the next year may also make global capital flows more 
volatile. In this context, it is important to evaluate both the pace of growth revival in India as 
well as the strength of macro-economic stability indicators. It is also essential to look at progress 
in vaccination as this is not just a health response but also a buffer against economic disruptions 
caused by repeated waves of the pandemic.  
Economy recovers past Pre-Pandemic levels
1.2  The Indian economy, as seen in quarterly estimates of GDP, has been staging a sustained 
recovery since the second half of 2020-21. Although the second wave of the pandemic in April-
June 2021 was more severe from a health perspective, the economic impact was muted compared 
to the national lockdown of the previous year (see Figures 1 & 2). Advance estimates suggest 
that GDP will record an expansion of 9.2 per cent in 2021-22. This implies that the level of real 
economic output will surpass the pre-COVID level of 2019-20. 
Page 4


CHAPTER
01
The last two years have been difficult for the world economy on account of the COVID-19 
pandemic. Repeated waves of infection, supply-chain disruptions and, more recently, 
inflation have created particularly challenging times for policy-making. Faced with these 
challenges, the Government of India’s immediate response was a bouquet of safety-nets 
to cushion the impact on vulnerable sections of society and the business sector. It next 
pushed through a significant increase in capital expenditure on infrastructure to build 
back medium-term demand as well as aggressively implemented supply-side measures to 
prepare the economy for a sustained long-term expansion. This chapter explains how this 
flexible and multi-layered approach is partly based on an “Agile” framework that uses 
feedback-loops, and the monitoring of real-time data. 
Advance estimates suggest that the Indian economy is expected to witness real GDP 
expansion of 9.2 per cent in 2021-22 after contracting in 2020-21. This implies that overall 
economic activity has recovered past the pre-pandemic levels. Almost all indicators 
show that the economic impact of the “second wave” in Q1 was much smaller than that 
experienced during the full lockdown phase in 2020-21 even though the health impact 
was more severe. 
Agriculture and allied sectors have been the least impacted by the pandemic and the 
sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the 
previous year. Advance estimates suggest that the GVA of Industry (including mining and 
construction) will rise by 11.8 per cent in 2021-22 after contracting by 7 per cent in 2020-
21. The Services sector has been the hardest hit by the pandemic, especially segments that 
involve human contact. This sector is estimated to grow by 8.2 per cent this financial year 
following last year’ s 8.4 per cent contraction. 
Total Consumption is estimated to have grown by 7.0 per cent in 2021-22 with significant 
contributions from government spending. Similarly, Gross Fixed Capital Formation 
exceeded pre-pandemic levels on the back of ramped up public expenditure on 
infrastructure. Exports of both goods and services have been exceptionally strong so far 
in 2021-22, but imports also recovered strongly with recovery in domestic demand as well 
as higher international commodity prices. 
State of the Economy
2 Economic Survey 2021-22
With the vaccination programme having covered the bulk of the population, economic 
momentum building back and the likely long-term benefits of supply-side reforms in the 
pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5 per 
cent in 2022-23. 
Nonetheless, the global environment still remains uncertain. At the time of writing, a new 
wave in the form of the Omicron variant was sweeping across the world, inflation had 
jumped up in most countries, and the cycle of liquidity withdrawal was being initiated 
by major central banks. This is why it is especially important to look at India’s macro-
economic stability indicators and their ability to provide a buffer against the above 
stresses. 
Despite all the disruptions caused by the global pandemic, India’s balance of payments 
remained in surplus throughout the last two years. This allowed the Reserve Bank of India 
to keep accumulating foreign exchange reserves (they stood at US$ 634 billion on 31
st
 
December 2021). This is equivalent to 13.2 months of merchandise imports and is higher 
than the country’s external debt. The combination of high foreign exchange reserves, 
sustained foreign direct investment, and rising export earnings will provide an adequate 
buffer against possible global liquidity tapering in 2022-23. 
The fiscal support given to the economy as well as to the health response caused the fiscal 
deficit and government debt to rise in 2020-21. However , a strong rebound in government 
revenues in 2021-22 has meant that the Government will comfortably meet its targets for 
the year while maintaining the support, and ramping up capital expenditure. The strong 
revival in revenues (revenue receipts were up over 67 per cent YoY in April-November 
2021) means that the Government has fiscal space to provide additional support if 
necessary. 
The financial system is always a possible area of stress during turbulent times. However, 
India’ s capital markets, like many global markets, have done exceptionally well and have 
allowed record mobilization of risk capital for Indian companies. More significantly, the 
banking system is well capitalized and the overhang of Non-Performing Assets seem to 
have structurally declined even allowing for some lagged impact of the pandemic. 
Vaccination is not merely a health response but is critical for opening up the economy, 
particularly contact-intensive services. Therefore, it should be treated for now as a 
macro-economic indicator. Over the course of a year, India delivered 157 crore doses 
that covered 91 crore people with at least one dose and 66 crore with both doses. The 
vaccination process for boosters and for the 15-18 year age group was also gathering 
pace at the time of writing. 
Inflation has reappeared as a global issue in both advanced and emerging economies. 
India’s Consumer Price Index inflation stood at 5.6 per cent YoY in December 2021 
which is within the targeted tolerance band. Wholesale price inflation, however, has been 
running in double-digits. Although this is partly due to base effects that will even out, 
3 State of the Economy
India does need to be wary of imported inflation, especially from elevated global energy 
prices. 
Overall, macro-economic stability indicators suggest that the Indian economy is well 
placed to take on the challenges of 2022-23. One of the reasons that the Indian economy 
is in a good position is its unique response strategy. Rather than pre-commit to a rigid 
response, Government of India opted to use safety-nets for vulnerable sections on one 
hand while responding iteratively based on Bayesian-updating of information. This 
“barbell strategy” was discussed in last year’s Economic Survey. A key enabler of this 
flexible, iterative “Agile” approach is the use of eighty High Frequency Indicators (HFIs) 
in an environment of extreme uncertainty. 
Another distinguishing feature of India’s response has been an emphasis on supply-side 
reforms rather than a total reliance on demand management. These supply-side reforms 
include deregulation of numerous sectors, simplification of processes, removal of legacy 
issues like ‘retrospective tax’, privatisation, production-linked incentives and so on. These 
have been discussed in detail in the respective chapters. Even the sharp increase in capital 
spending by the Government can be seen both as demand and supply enhancing response 
as it creates infrastructure capacity for future growth. This year’s Survey particularly 
highlights the importance of process reforms in a number of sectors while Chapter 11 
provides a brief demonstration of the use of satellite images and geo-spatial data, both 
recently deregulated sectors, for gauging economic development. 
INTRODUCTION
1.1 Two years into the COVID-19 pandemic, the global economy continues to be plagued 
by uncertainty, with resurgent waves of mutant variants, supply-chain disruptions, and a return 
of inflation in both advanced and emerging economies. Moreover, the likely withdrawal of 
liquidity by major central banks over the next year may also make global capital flows more 
volatile. In this context, it is important to evaluate both the pace of growth revival in India as 
well as the strength of macro-economic stability indicators. It is also essential to look at progress 
in vaccination as this is not just a health response but also a buffer against economic disruptions 
caused by repeated waves of the pandemic.  
Economy recovers past Pre-Pandemic levels
1.2  The Indian economy, as seen in quarterly estimates of GDP, has been staging a sustained 
recovery since the second half of 2020-21. Although the second wave of the pandemic in April-
June 2021 was more severe from a health perspective, the economic impact was muted compared 
to the national lockdown of the previous year (see Figures 1 & 2). Advance estimates suggest 
that GDP will record an expansion of 9.2 per cent in 2021-22. This implies that the level of real 
economic output will surpass the pre-COVID level of 2019-20. 
4 Economic Survey 2021-22
Figure 1: Gross Domestic Output (Constant Prices, Base Year:2011-12)
25
28
31
34
37
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2 01 9-2 0 2 02 0-2 1 2 02 1-22
? Lakh Crore
G DP G VA
1st Lockdown
2nd Wave
1 10
1 15
1 20
1 25
1 30
1 35
1 40
1 45
1 50
2 01 8-1 9 2 01 9-2 0 2 02 0-21
(PE )
2 02 1-2 2
(AE )
? Lakh Crore
G DP G VA
GDP Pre-Pandemic Level 
GVA Pre-Pandemic Level 
Source: National Accounts Statistics (NSO), MoSPI
Figure 2: Waves of COVID-19
0%
5%
10%
15%
20%
25%
0
1
2
3
4
5
15/ 04/ 20
25/ 05/ 20
04/ 07/ 20
13/ 08/ 20
22/ 09/ 20
01/ 11/ 20
11/ 12/ 20
20/ 01/ 21
01/ 03/ 21
10/ 04/ 21
20/ 05/ 21
29/ 06/ 21
08/ 08/ 21
17/ 09/ 21
27/ 10/ 21
06/ 12/ 21
15/ 01/ 22
L ak h
Daily New Cases
Positivity rate (7 DMA, RHS)
Second Wave
4 x
First Wave
Source: Data accessed from Ministry of Health and Family Welfare (MoH&FW) 
Note: DMA stands for Daily Moving Average
SECTORAL TRENDS
1.3 Not surprisingly, the agricultural sector was the least impacted by the pandemic-related 
disruptions (Figure 3). It is estimated to grow 3.9 per cent in 2021-22 on top of 3.6 per cent and 
4.3 per cent respectively in the previous two years (Table 1). This sector now accounts for 18.8 
per cent of GV A.
Table 1: Annual Growth of GV A at constant (2011-12) prices (per cent)
Sectors 2019-20 
(1st RE)
2020-21 
(PE)
2021-22 
(1st  AE)
Recovery 
over 2019-20
Agriculture & Allied Sectors 4.3 3.6 3.9 107.7
Industry -1.2 -7.0 11.8 104.1
Mining & quarrying -2.5 -8.5 14.3 104.6
Page 5


CHAPTER
01
The last two years have been difficult for the world economy on account of the COVID-19 
pandemic. Repeated waves of infection, supply-chain disruptions and, more recently, 
inflation have created particularly challenging times for policy-making. Faced with these 
challenges, the Government of India’s immediate response was a bouquet of safety-nets 
to cushion the impact on vulnerable sections of society and the business sector. It next 
pushed through a significant increase in capital expenditure on infrastructure to build 
back medium-term demand as well as aggressively implemented supply-side measures to 
prepare the economy for a sustained long-term expansion. This chapter explains how this 
flexible and multi-layered approach is partly based on an “Agile” framework that uses 
feedback-loops, and the monitoring of real-time data. 
Advance estimates suggest that the Indian economy is expected to witness real GDP 
expansion of 9.2 per cent in 2021-22 after contracting in 2020-21. This implies that overall 
economic activity has recovered past the pre-pandemic levels. Almost all indicators 
show that the economic impact of the “second wave” in Q1 was much smaller than that 
experienced during the full lockdown phase in 2020-21 even though the health impact 
was more severe. 
Agriculture and allied sectors have been the least impacted by the pandemic and the 
sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the 
previous year. Advance estimates suggest that the GVA of Industry (including mining and 
construction) will rise by 11.8 per cent in 2021-22 after contracting by 7 per cent in 2020-
21. The Services sector has been the hardest hit by the pandemic, especially segments that 
involve human contact. This sector is estimated to grow by 8.2 per cent this financial year 
following last year’ s 8.4 per cent contraction. 
Total Consumption is estimated to have grown by 7.0 per cent in 2021-22 with significant 
contributions from government spending. Similarly, Gross Fixed Capital Formation 
exceeded pre-pandemic levels on the back of ramped up public expenditure on 
infrastructure. Exports of both goods and services have been exceptionally strong so far 
in 2021-22, but imports also recovered strongly with recovery in domestic demand as well 
as higher international commodity prices. 
State of the Economy
2 Economic Survey 2021-22
With the vaccination programme having covered the bulk of the population, economic 
momentum building back and the likely long-term benefits of supply-side reforms in the 
pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5 per 
cent in 2022-23. 
Nonetheless, the global environment still remains uncertain. At the time of writing, a new 
wave in the form of the Omicron variant was sweeping across the world, inflation had 
jumped up in most countries, and the cycle of liquidity withdrawal was being initiated 
by major central banks. This is why it is especially important to look at India’s macro-
economic stability indicators and their ability to provide a buffer against the above 
stresses. 
Despite all the disruptions caused by the global pandemic, India’s balance of payments 
remained in surplus throughout the last two years. This allowed the Reserve Bank of India 
to keep accumulating foreign exchange reserves (they stood at US$ 634 billion on 31
st
 
December 2021). This is equivalent to 13.2 months of merchandise imports and is higher 
than the country’s external debt. The combination of high foreign exchange reserves, 
sustained foreign direct investment, and rising export earnings will provide an adequate 
buffer against possible global liquidity tapering in 2022-23. 
The fiscal support given to the economy as well as to the health response caused the fiscal 
deficit and government debt to rise in 2020-21. However , a strong rebound in government 
revenues in 2021-22 has meant that the Government will comfortably meet its targets for 
the year while maintaining the support, and ramping up capital expenditure. The strong 
revival in revenues (revenue receipts were up over 67 per cent YoY in April-November 
2021) means that the Government has fiscal space to provide additional support if 
necessary. 
The financial system is always a possible area of stress during turbulent times. However, 
India’ s capital markets, like many global markets, have done exceptionally well and have 
allowed record mobilization of risk capital for Indian companies. More significantly, the 
banking system is well capitalized and the overhang of Non-Performing Assets seem to 
have structurally declined even allowing for some lagged impact of the pandemic. 
Vaccination is not merely a health response but is critical for opening up the economy, 
particularly contact-intensive services. Therefore, it should be treated for now as a 
macro-economic indicator. Over the course of a year, India delivered 157 crore doses 
that covered 91 crore people with at least one dose and 66 crore with both doses. The 
vaccination process for boosters and for the 15-18 year age group was also gathering 
pace at the time of writing. 
Inflation has reappeared as a global issue in both advanced and emerging economies. 
India’s Consumer Price Index inflation stood at 5.6 per cent YoY in December 2021 
which is within the targeted tolerance band. Wholesale price inflation, however, has been 
running in double-digits. Although this is partly due to base effects that will even out, 
3 State of the Economy
India does need to be wary of imported inflation, especially from elevated global energy 
prices. 
Overall, macro-economic stability indicators suggest that the Indian economy is well 
placed to take on the challenges of 2022-23. One of the reasons that the Indian economy 
is in a good position is its unique response strategy. Rather than pre-commit to a rigid 
response, Government of India opted to use safety-nets for vulnerable sections on one 
hand while responding iteratively based on Bayesian-updating of information. This 
“barbell strategy” was discussed in last year’s Economic Survey. A key enabler of this 
flexible, iterative “Agile” approach is the use of eighty High Frequency Indicators (HFIs) 
in an environment of extreme uncertainty. 
Another distinguishing feature of India’s response has been an emphasis on supply-side 
reforms rather than a total reliance on demand management. These supply-side reforms 
include deregulation of numerous sectors, simplification of processes, removal of legacy 
issues like ‘retrospective tax’, privatisation, production-linked incentives and so on. These 
have been discussed in detail in the respective chapters. Even the sharp increase in capital 
spending by the Government can be seen both as demand and supply enhancing response 
as it creates infrastructure capacity for future growth. This year’s Survey particularly 
highlights the importance of process reforms in a number of sectors while Chapter 11 
provides a brief demonstration of the use of satellite images and geo-spatial data, both 
recently deregulated sectors, for gauging economic development. 
INTRODUCTION
1.1 Two years into the COVID-19 pandemic, the global economy continues to be plagued 
by uncertainty, with resurgent waves of mutant variants, supply-chain disruptions, and a return 
of inflation in both advanced and emerging economies. Moreover, the likely withdrawal of 
liquidity by major central banks over the next year may also make global capital flows more 
volatile. In this context, it is important to evaluate both the pace of growth revival in India as 
well as the strength of macro-economic stability indicators. It is also essential to look at progress 
in vaccination as this is not just a health response but also a buffer against economic disruptions 
caused by repeated waves of the pandemic.  
Economy recovers past Pre-Pandemic levels
1.2  The Indian economy, as seen in quarterly estimates of GDP, has been staging a sustained 
recovery since the second half of 2020-21. Although the second wave of the pandemic in April-
June 2021 was more severe from a health perspective, the economic impact was muted compared 
to the national lockdown of the previous year (see Figures 1 & 2). Advance estimates suggest 
that GDP will record an expansion of 9.2 per cent in 2021-22. This implies that the level of real 
economic output will surpass the pre-COVID level of 2019-20. 
4 Economic Survey 2021-22
Figure 1: Gross Domestic Output (Constant Prices, Base Year:2011-12)
25
28
31
34
37
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2 01 9-2 0 2 02 0-2 1 2 02 1-22
? Lakh Crore
G DP G VA
1st Lockdown
2nd Wave
1 10
1 15
1 20
1 25
1 30
1 35
1 40
1 45
1 50
2 01 8-1 9 2 01 9-2 0 2 02 0-21
(PE )
2 02 1-2 2
(AE )
? Lakh Crore
G DP G VA
GDP Pre-Pandemic Level 
GVA Pre-Pandemic Level 
Source: National Accounts Statistics (NSO), MoSPI
Figure 2: Waves of COVID-19
0%
5%
10%
15%
20%
25%
0
1
2
3
4
5
15/ 04/ 20
25/ 05/ 20
04/ 07/ 20
13/ 08/ 20
22/ 09/ 20
01/ 11/ 20
11/ 12/ 20
20/ 01/ 21
01/ 03/ 21
10/ 04/ 21
20/ 05/ 21
29/ 06/ 21
08/ 08/ 21
17/ 09/ 21
27/ 10/ 21
06/ 12/ 21
15/ 01/ 22
L ak h
Daily New Cases
Positivity rate (7 DMA, RHS)
Second Wave
4 x
First Wave
Source: Data accessed from Ministry of Health and Family Welfare (MoH&FW) 
Note: DMA stands for Daily Moving Average
SECTORAL TRENDS
1.3 Not surprisingly, the agricultural sector was the least impacted by the pandemic-related 
disruptions (Figure 3). It is estimated to grow 3.9 per cent in 2021-22 on top of 3.6 per cent and 
4.3 per cent respectively in the previous two years (Table 1). This sector now accounts for 18.8 
per cent of GV A.
Table 1: Annual Growth of GV A at constant (2011-12) prices (per cent)
Sectors 2019-20 
(1st RE)
2020-21 
(PE)
2021-22 
(1st  AE)
Recovery 
over 2019-20
Agriculture & Allied Sectors 4.3 3.6 3.9 107.7
Industry -1.2 -7.0 11.8 104.1
Mining & quarrying -2.5 -8.5 14.3 104.6
5 State of the Economy
Manufacturing -2.4 -7.2 12.5 104.4
Electricity, gas, water supply & 
other utility services
2.1 1.9 8.5 110.5
Construction 1.0 -8.6 10.7 101.2
Services 7.2 -8.4 8.2 99.2
Trade, hotels, transport, 
communication and services 
related to broadcasting 
6.4 -18.2 11.9 91.5
Financial,  real estate  &  
professional services 
7.3 -1.5 4.0 102.5
Public administration, defence 
and Other Services
8.3 -4.6 10.7 105.6
GV A at basic price 4.1 -6.2 8.6 101.9
Source: NSO 
Note: RE - Revised Estimates, PE - Provisional Estimates, AE - Advance Estimates
1.4 As shown in Figures 5 and 6 below, the area sown under Kharif and Rabi crops, and 
the production of wheat and rice has been steadily increasing over the years. In line with the 
longer term trend, the area sown in the Kharif cycle of 2021-22 was again higher than in the 
previous year (the Rabi cycle data was incomplete at the time of writing). In the current year, 
food grains production for the Kharif season is estimated to post a record level of 150.5 million 
tonnes. Procurement of food grains under the central pool accordingly maintained its rising 
trend in 2021-22 along with minimum support prices, which augur well for national food 
security and farmers’ incomes. Importantly, the strong performance of the sector was supported 
by Government policies that ensured timely supplies of seed and fertilizers despite pandemic 
related disruptions. It was also helped by good monsoon rains as reflected in reservoir levels 
being higher than the 10-year average (Figure 4).
Figure 3: Real GV A of Agriculture 
& Allied Sectors
Figure 4: Reservoir Levels
0
20
40
60
80
100
Jan/19
Jun/19
Nov/19
Apr/20
Sep/20
Feb/21
Jul/21
Dec/21
Per cent of FRL
Curr ent live storage Last 10 years average
Source: NSO, Central Water Commission
Note: FRL stands for Full Reservoir Level