Key points
- Real GDP grew 8.7% (provisional) as the economy reopened after the second COVID-19 wave.
- The repo rate was held at 4.00% throughout the year; CPI inflation averaged 5.5%.
- Commodity, freight and energy prices surged, and the conflict in Ukraine from February 2022 pushed crude oil above US$100 a barrel.
- The Nifty 50 rose 18.9%; the 10-year government bond yield rose to about 6.84%.
The year in brief
FY2021-22 began with a severe second COVID-19 wave in April and May 2021, but the economic impact was shorter than in the first wave. Activity recovered quickly as vaccination expanded, and real GDP grew 8.7% in the provisional estimate, later revised up to 9.7%.
The defining shift was in costs. Global supply chains struggled to meet recovering demand, shipping rates multiplied, and metals, energy and edible oils rose sharply. The year closed with the outbreak of war in Ukraine in February 2022, which added an energy shock.
| Indicator | Value | Note |
|---|---|---|
| Real GDP growth | 8.7% | Provisional estimate, May 2022; later revised to 9.7%. |
| CPI inflation, annual average | 5.5% | MoSPI / RBI |
| RBI repo rate, year-end | 4.00% | RBI |
| 10-year government bond yield, year-end | ≈6.84% | Approximate, last trading day |
| Nifty 50, year-end close | 17,464.75 | +18.9% over the year, price only |
| USD/INR, year-end | ≈75.81 | Rupee weaker by ≈3.0% |
| Central government fiscal deficit | 6.7% of GDP | Provisional actuals |
Policy and credit
The RBI kept the repo rate at 4.00% and maintained an accommodative stance to support the recovery, even as CPI inflation averaged 5.5% and wholesale inflation ran much higher. Liquidity remained in large surplus. The fiscal deficit narrowed to 6.7% of GDP as revenues recovered.
Markets
The Nifty 50 ended the year at 17,464.75, up 18.9%, after reaching record highs in October 2021 and then becoming more volatile as global central banks signalled tightening. Bond markets began to price higher rates early: the 10-year yield rose to about 6.84%. The rupee weakened modestly to about 75.81 per US dollar.
What it meant for businesses
Revenue recovered, but margins often did not. Many businesses bought inventory early to protect against shortages and price rises, which absorbed cash. Firms on fixed-price contracts without escalation clauses carried the cost increases themselves. Low interest rates made borrowing for working capital cheap, which masked the underlying pressure on cash conversion.
Long-term perspective
Inflation transfers value between counterparties according to contract terms and bargaining power. The durable lessons are:
- Review customer contracts for price-escalation or input-cost pass-through terms.
- Measure the cash conversion cycle monthly; rising inventory is a use of cash, not a sign of strength.
- Model at least one scenario in which input costs rise faster than selling prices.
Sources and method
- Ministry of Statistics and Programme Implementation (MoSPI): national accounts press releases and CPI releases.
- Reserve Bank of India: Monetary Policy Statements, Annual Reports and the Database on Indian Economy (DBIE), including the USD/INR reference rate.
- National Stock Exchange of India: Nifty 50 index closing values.
- Ministry of Finance / Controller General of Accounts: Union Budget documents and provisional accounts (fiscal deficit).
Fiscal year runs 1 April to 31 March. GDP growth is shown as first published after the year closed; later official revisions are noted in the table. Market levels are closing values on the last trading day of the fiscal year; bond yields and exchange rates are rounded. Index changes are price only and exclude dividends.