Amid COVID-19 case surge, main brokerages downgrade India’s GDP forecast for FY22

Amid COVID-19 case surge, main brokerages downgrade India’s GDP forecast for FY22

Whereas Nomura has downgraded projections of financial progress for the fiscal yr ending March 2022 to 12.6 p.c from 13.5 p.c earlier, JP Morgan now initiatives GDP progress at 11 p.c from 13 p.c earlier

Amid COVID-19 case surge, leading brokerages downgrade India’s GDP forecast for FY22

Representational Picture. Reuters

New Delhi: With the resurgence of COVID-19 instances posing dangers to financial restoration, main brokerages have downgraded India’s GDP progress projections for the present fiscal yr to as little as 10 p.c on native lockdowns threatening fragile restoration.

Whereas Nomura has downgraded projections of financial progress for the fiscal yr ending March 2022 to 12.6 p.c from 13.5 p.c earlier, JP Morgan now initiatives GDP progress at 11 per cent from 13 p.c earlier. UBS sees 10 p.c GDP progress, down from 11.5 p.c earlier and Citi has downgraded progress to 12 p.c.

India’s GDP progress had been on the decline even earlier than the pandemic struck earlier final yr. From a progress price of 8.3 p.c in FY’17, the GDP growth had dipped to six.8 p.c and 6.5 p.c within the following two years and to 4 p.c in 2019-20.

Within the COVID-19 -ravaged 2020-21 fiscal (April 2020 to March 2021), the economic system is projected to have contracted by as much as 8 p.c. The low base of FY’21 was seen aiding a double-digit progress price within the present fiscal earlier than moderating to six.8 p.c in FY’23.

The RBI has projected FY’22 GDP progress at 10.5 p.c, whereas IMF places it at 12.5 p.c. The World Financial institution sees 2021-22 progress at 10.1 p.c.

The pandemic caseload in India has been surging hitting new information every single day for the previous fortnight. The newest official quantity places the day by day infections at 2.61 lakh up to now 24 hours and 1,501 deaths.

“India is within the midst of a resurgence of COVID-19 instances, with the day by day case rely two occasions the 2020 peak. If the efforts to get the virus beneath management are profitable over the approaching weeks, we expect restoration ought to collect steam from Q2 FY’22 onward,” UBS mentioned revising its FY’22 actual GDP progress forecast to 10 per cent year-on-year (beforehand 11.5 per cent).

UBS anticipated present mobility restrictions to stay in place till end-Might after which be lifted, and assume exercise is basically again to regular by end-June. “At the same time as these measures are prone to dampen financial exercise, we expect the impression will probably be a lot decrease than in 2020, as containment measures are fairly focused and households and companies have adjusted to the ”new regular”.”

In its alternate danger state of affairs, the place disruptions may last more, there’s a danger India”s actual GDP may gradual by a a lot bigger magnitude, to 3-5 per cent in FY22, it mentioned.

Citi Analysis mentioned whereas restrictions are a lot much less stringent in comparison with final yr, they’re rising as Covid instances proceed to mount.

“Covid instances are concentrated round economically essential states like Maharashtra, Gujrat and Delhi. Accounting for each the restriction and sentiment channel, now we have revised down our FY’22 actual GDP forecast to 12 p.c year-on-year (vs 12.5 p.c earlier). Downward revisions are led extra by companies and personal consumption than business,” it mentioned.

If the Covid state of affairs, it mentioned, is just not introduced beneath management then there could possibly be a interval of a number of progress revisions like in final yr.

Stating that it sees a ”W” formed restoration and never ”V” formed, Citi mentioned Q1 FY’22 actual GDP progress is seen 28 p.c.

Credit score Suisse mentioned day by day new instances are double the final peak in September 2020.

“The spike in energetic instances throughout most districts (is) inflicting panic and shortages,” it mentioned including the speedy unfold means it is going to be much less protracted too.

In contrast to the stringent nationwide lockdown imposed final yr to include the unfold of coronavirus , “lockdowns are prone to be localised, short-lived, and fewer stringent than final yr,” it mentioned.

Stating that Maharashtra lockdown is an aberration, Credit score Suisee mentioned it might shut 15 p.c of GDP for 15 days.

Different states are utilizing evening curfews, limits on giant gatherings and weekend restrictions.

“If GDP restrictions are 5 p.c ex-Maharashtra until end-Might, and Maharashtra lifts by end-April, FY22 impression will probably be 1 p.c,” it mentioned. “Macro supportive, enterprise momentum unlikely to harm if restrictions are short-lived.”

Wall Road brokerage Financial institution of America (BofA) Securities mentioned the spike in coronavirus instances poses a danger to financial restoration, and the GDP is unlikely to attain the sooner projected 3 per cent progress for March quarter 2020-21.

Stating {that a} month-long nationwide lockdown can shave off 100-200 foundation factors off the GDP, it mentioned progress continues to be weak, amplified by the steep fall in key financial exercise indicators and the anaemic mortgage progress, and the surging pandemic instances are solely rising the concerns on the expansion entrance.

Fitch Options mentioned there’s a third wave of COVID-19 infections creeping into India.

After some success in curbing the virus significantly, India”s economic system had returned to functioning usually by the second half of 2020. “Nevertheless, over current weeks, the virus has began spreading quickly, partly as a result of complacency on the social distancing measures and mask-wearing insurance policies,” it mentioned. “India lags far behind in immunisations per capita. An unprecedented disaster has highlighted the necessity to enhance funding within the healthcare sector within the nation.”

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