S&P Global Ratings recently cut India's growth forecast for this fiscal to 9.5 per cent from 11 per cent earlier, saying a severe second wave of the COVID-19 outbreak in April and May led to lockdowns imposed by states and sharp contraction in economic activity. The US rating agency warned of risk to the outlook from further waves of pandemic.
The permanent damage to private and public sector balance sheets will constrain growth over the next couple of years, according to the company, which projected India's growth at 7.8 per cent in the next fiscal ending March 31 next year.S&P Global Ratings recently cut India's growth forecast for this fiscal to 9.5 per cent from 11 per cent earlier, saying a severe second wave of the COVID-19 outbreak in April and May led to lockdowns imposed by states and sharp contraction in economic activity. The US rating agency warned of risk to the outlook from further waves of pandemic.#
“Further pandemic waves are a risk to the outlook given that only about 15 per cent of the population has received at least one vaccine dose so far, although vaccine supplies are expected to ramp up,” it was quoted as saying by a news agency.
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.
GDP growth in the current fiscal was estimated to be in double digits initially, but a severe second wave of pandemic has led to various agencies cut growth projections.
“The economy has turned a corner now. New COVID-19 cases have been falling consistently and mobility is recovering. We expect this recovery to be less steep compared with the bounce in late 2020 and early 2021,” it said.
S&P said households are running down saving buffers to support consumption and a desire to rebuild saving could hold back spending even as the economy reopens.
“Monetary and fiscal policies will remain accommodative but new stimulus will not be forthcoming,” it added.
S&P said RBI has no room to cut interest rates with inflation above 6 per cent the upper end of the central bank target range.
Also, fiscal policy is constrained by limited policy space, particularly because the budget for fiscal 2022 (ending March 31, 2022), which was decided before the second COVID-19 wave, had already targeted a large general government deficit of 9.5 per cent of GDP.
Fibre2Fashion News Desk (DS)
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