US-based rating agency Moody’s on Wednesday revised India’s GDP growth rate forecast for the 2021 calendar year to 9.6 per cent. Earlier, the agency had estimated a 13.9 per cent growth rate.
Moody’s said that a faster rate of Covid vaccination would create a positive effect on the country’s economy and would minimise the restriction on GDP flow. But the second wave of Covid slumped the economy which will result in slower growth than previously estimated, it added.
Its report on India stated that the second wave of COVID which hit India between April and May created uncertainty in the country’s economy.
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"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," Moody's said in a report titled "Macroeconomics India: Economic shocks from second Covid wave will not be as severe as last year's".
Another report from Moody’s on the Infrastructure sector said that a slower vaccination rate would affect country's economy in the long run since the requirement of further lockdowns is not possible to rule out.
"While infection rates have been declining and restrictions relaxed in many regions, vaccination rates remain low. As a result, the risk of subsequent waves that could require further lockdowns cannot be ruled out. Thus, we expect a more gradual recovery in economic growth for the fiscal year ending March 2022," Moody's said in a separate report on India's infrastructure sector.
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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.
Back during the first wave, the Indian economy contracted by 7.3 per cent in fiscal 2020-21, compared to a 4 per cent growth in fiscal 2019-20.
"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 also analysed the economic challenges faced by different states. It said that the 10 states that amounted to 60 per cent of economic activity before the pandemic are now the worst hit in the entire country.
Four states - Maharashtra, Tamil Nadu, Uttar Pradesh and Karnataka - contributed the largest shares among all states in the financial year 2019-20.
Domestic rating agency ICRA too had projected economic growth at 8.5 per cent for this financial year, while British brokerage firm Barclays had last month cut India's growth forecast to 9.2 per cent.
