- Friday, April 26, 2024
By: Shubham Ghosh
Shubham Ghosh
MOODY’S Investors Service on Wednesday (23) slashed India’s growth projections to 9.6 per cent for the 2021 calendar year, from the earlier estimate of 13.9 per cent and warned that faster vaccination progress will be key in limiting economic losses in the June quarter.
In its report called ‘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 the pandemic hit India’s economy in April and May. According to Moody’s, the resurgence of the virus added uncertainty to India’s growth forecast for 2021 but predicted 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,” Moody’s said.
Earlier in June, Moody’s had projected India to register a 9.3 per cent growth in the current fiscal ending March 2022 but the severe second wave of the pandemic has raised risks to the country’s credit profile and rated entities. The Indian economy shrunk by 7.3 per cent in 2020-21 fiscal as the country battled the first wave of Covid, as against four percent growth in 2019-20.
Stating that strict lockdowns in economically crucial states will hit the April-June quarter economic activity, Moody’s said the 10 states that have been hit worst by the second wave collectively account for more than 60 per cent of the pre-pandemic level of India’s GDP.
India’s vaccination progress key, says Moody’s
On India’s vaccination drive, Moody’s said a faster pace will be important in controlling the economic losses to the current quarter. As it stood in the third week of June, only around 16 per cent of India’s population has received at least one dose of the vaccine and of that, only 3.6 percent has been fully vaccinated.
“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 said.
While predicting the overall impact on the Indian economy will be softer in the second wave compared to that in the first, Moody’s said the pace of the recovery will depend on the access to and delivery of vaccines and the strength of the recovery in private consumption, which could be affected by the deterioration of balance sheets of low- and middle-income households from jobs, income and loss of wealth.
