Moody’s cuts its growth forecast for India 2021 to 9.6%, from an earlier estimate of 13.9%, Auto News, ET Auto
New Delhi: Moody’s Investors Service on Wednesday reduced India’s growth projection to 9.6% for calendar year 2021, from its previous estimate of 13.9%.
According to the report titled “Macroeconomics – India: Economic shocks of the second wave of COVID will not be as severe as last year, mobility and economic activity in the country are expected to accelerate in the second half of the year as the The pace of vaccinations is accelerating. . High-frequency economic indicators show that the second wave of COVID-19 infections hit the Indian economy in April and May. With states now easing restrictions, economic activity in May is expected to bottom out. Faster progress in immunization will be important in limiting economic losses in the June quarter.
“During the first wave of COVID-19, supply chain disruptions and production shutdowns added to the demand shock, amplifying the contraction of the economy. The second wave mainly affected aggregate demand, although still not as severely as in the first wave, â€he said, adding that the government had recently announced a strategy to centralize vaccine supply in order to boost vaccinations, which, if successful, will support economic recovery. .
The report adds that retail data for May shows passenger vehicle and two-wheeler sales fell month-over-month, reflecting the gradual slowdown in consumer demand resulting from localized lockdowns, as opposed to abruptly stopping at zero. retail sales during the nationwide lockdown in April 2020. Tractor sales, which were on the road to recovery, weakened in April and May, indicating that new cases of the virus in rural pockets have affected sentiment in rural areas. consumers.
“Diesel consumption in May fell month over month, indicating limited transport activity due to lockdown-induced mobility restrictions,†the report said.
“Rural demand, which has remained resilient, will continue to be supported by strong agricultural production, the recently announced increase in the minimum support price for all mandatory kharif crops for the 2021-22 season, as well as continued support for employment under Mahatma Gandhi. National Rural Employment Guarantee Act (MGNREGA), â€he added.
According to the report, the overall impact on the Indian economy is expected to be smaller than that of the first wave last year. However, the pace of the recovery will be determined by access to and delivery of vaccines, as well as the strength of the recovery in private consumption, which could be hampered by the deterioration in the balance sheets of low- and middle-income households as a result of employment, income and loss of wealth.
Earlier this month, Moody’s predicted India would see 9.3% growth in the current fiscal year, ending March 2022, but a second severe COVID wave has increased the risks for the profile credit and rated entities of India.
India’s economy contracted 7.3% in FY21 as the country battled the first wave of COVID, up from 4% growth in FY20.
Moody’s said the 10 states that were hit hardest by the second wave collectively represent more than 60% of India’s pre-pandemic level of GDP. He added that strict lockdowns in economically important states will impact economic activity in the April-June quarter,
Four states, Maharashtra, Tamil Nadu, Uttar Pradesh and Karnataka, contributed the largest share of all states in fiscal year 2019-2020.
The second Indian wave peaked in early May. The highest number of cases in a day was 4,14,188 reported on May 7 and since then there has been a continued decline in daily cases.
