The rising number of COVID-19 infections in recent weeks have reignited uncertainties related to the near-term outlook, a domestic rating agency said on Thursday.

Icra Ratings, a division of global rater Moody’s Investors Service, said the uncertainty will persist over the next few months until the vaccines become available in India for all adults.

Earlier in the day, RBI Governor Shaktikanta Das had stressed that the economic recovery will continue unabated despite the surge in cases and he does not see a downward revision in the central bank’s 10.5 per cent real GDP growth estimate for the financial year 2022, and he does not see lockdowns either.

It can be noted that India reported over 55,000 fresh infections on Wednesday, including 31,000 in Maharashtra alone, which is the state’s highest-ever daily count since the onset of the crisis.

“Although the GDP has reverted to pre-COVID levels in Q3 and Q4 FY21, uncertainty related to the near-term outlook has risen considerably in the recent weeks, following the spate of new COVID-19 infections, which have necessitated localised restrictions,” the rating agency said.

The rapid economic recovery witnessed in India in H2 CY2020 has given way to an uneven performance amongst the lead indicators in the last two months, its principal economist Aditi Nayar said.

“One year post the lockdown, a favourable base effect will optically boost the performance of most sectors in March 2021,” she said.

She added that the GDP will register a 2 per cent growth in the ongoing fourth quarter of 2021.

The agency forecasts GDP growth in the financial year 2022 in a range of 10-11 per cent, and a key upside to the projection is a faster-than-expected pick-up in government spending in the coming fiscal year, it said.

The key risks to the recovery are the sustenance of the latest wave of COVID-19 infections and its spread to additional states, the existing vaccines not being effective enough against new variants of the infection, and a spike in commodity prices to a level that starts to constrain demand, it added.

If the trend of increasing infections and localised lockdowns proliferates, it would temper the extent of the base effect-led recovery anticipated in the immediate term, and may lead to some supply-side disruptions, the agency warned.

During January-February 2021, the performance of half of the 14 lead indicators tracked by ICRA faltered relative to their YoY (year-over-year) trend in the third quarter of the financial year 2021, such as the output of Coal India, electricity generation, diesel and petrol consumption, rail freight traffic, motorcycle sales and generation of GST e-way bills.

In contrast, there was an improvement in the performance of non-oil merchandise exports, ports cargo traffic, sales of scooters, passenger vehicles and tractors, and passenger movement by airlines, it added.

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