Rating agency Moody’s has downgraded India’s growth forecast to 9.6 per cent in the 2021 calendar year as against an earlier projection of 13.9 per cent. The decline in projected growth is attributed to the second wave of the COVID-19 pandemic that wreaked havoc across India. Earlier this month, the World Bank too slashed India’s growth forecast to 8.2% for 2021.
The agency has said that a faster immunisation drive will be a key factor to restrict the economic losses to the quarter ending June. It said faster vaccination progress will be paramount in restricting economic losses to the current quarter. Till June 22, over 29.46 crore COVID-19 jabs have been administered so far. Of it, over 54.24 lakh people were vaccinated on Tuesday.
“Mobility and economic activity will likely accelerate in the second half of the year as the pace of vaccinations pick up. The government recently announced a strategy to centralise vaccine procurement in order to boost vaccinations, which if successful, will support the economic recovery,” it added.
Moody’s expects the overall hit to India’s economy to be softer than that during the first wave last year. However, the pace of recovery will be determined by access to and delivery of vaccines, and the strength of the recovery in private consumption, which could be hampered by the deterioration of balance sheets of low- and middle-income households from job, income and wealth losses.
Economic damage restricted to June quarter
In its report titled ‘Macroeconomics – India: Economic shocks from second COVID wave will not be as severe as last year’s’, Moody’s said high-frequency economic indicators show that the second wave of COVID-19 infections hit India’s economy in April and May. With states now easing restrictions, economic activity in May is likely to signify the trough.
The agency said, “The virus resurgence adds uncertainty to India’s growth forecast for 2021; however, it is likely that the economic damage will remain restricted to the April-June quarter. We currently expect India’s real GDP to grow at 9.6 per cent in 2021 and 7 per cent in 2022.”
Earlier this month, Moody’s had projected India to clock a 9.3 per cent growth in the current fiscal ending March 2022, but a severe second COVID wave has increased risks to India’s credit profile and rated entities. Indian economy contracted by 7.3 per cent in fiscal 2020-21 as the country battled the first wave of COVID, as against a 4 per cent growth in 2019-20.
Lockdown affected economic activity
Stating that stringent lockdowns in economically significant states will mar April-June quarter economic activity, Moody’s said the 10 states that have been hardest hit by the second wave collectively account for more than 60 per cent of the pre-pandemic level of India’s GDP.
Four states – Maharashtra, Tamil Nadu, Uttar Pradesh and Karnataka – contributed the largest shares among all states in the financial year 2019-20.
The health ministry on Wednesday informed that over 50,848 fresh cases of COVID-19 have been reported in India in the past 24 hours. The addition of the fresh cases has taken the COVID-19 case tally past 3 crore. Also, 1,358 COVID-19 related deaths were reported by the ministry during this period. The addition of the fresh fatalities has taken India’s death toll due to the deadly virus to 3,90,660.
Of the over 3 crore coronavirus cases reported so far, over 6.43 lakh are active cases of the virus. It is 2.14 per cent of the total caseload. Over 2.89 crore cases have recovered from the viral infection so far.
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