Moody's Investors Service recently slashed India's growth projection to 9.6 per cent for 2021 from its earlier estimate of 13.9 per cent, saying faster vaccination progress will be the key to restrict economic losses in the June quarter. High-frequency economic indicators show the second wave of COVID-19 infections hit the economy in April and May, it said.
In its report titled 'Macroeconomics India: Economic shocks from second COVID wave will not be as severe as last year's', Moody's said economic activity in May is likely to signify the trough, with states now easing restrictions.Moody's Investors Service recently slashed India's growth projection to 9.6 per cent for 2021 from its earlier estimate of 13.9 per cent, saying faster vaccination progress will be the key to restrict economic losses in the June quarter. High-frequency economic indicators show the second wave of COVID-19 infections hit the economy in April and May, it 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," the rating agency said.
Earlier this month, it 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.
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 fiscal 2019-20.
Moody's said faster vaccination progress will be paramount in restricting economic losses to the current quarter. As of the third week in June, only about 16 per cent of the population had received one vaccine dose; of those, only about 3.6 per cent had 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 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.
Fibre2Fashion News Desk (DS)
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