Covid-19 vaccination campaign at a state health center during the Covid-19 emergency in Kolkata, India, May 3, 2021. Pfizer in talks with India about accelerated approval of the Covid-19 vaccine, according to an Indian media report.
Indranil Aditya | NurPhoto | Getty Images
India’s economy is likely to have improved in the three months that ended in March – but analysts have lowered growth expectations for the current quarter that ends in June.
It comes as India continues to battle a devastating second wave of the coronavirus outbreak.
The gross domestic product for the period January through March – India’s fourth fiscal quarter – is due Monday around noon GMT. India’s fiscal year starts in April and ends in March of next year.
Reuters reported that the economists surveyed have an average forecast of 1% year-over-year growth for the March quarter – an increase of 0.4% in the previous quarter. However, economists are less optimistic about the current quarter, which ends in June.
We need to reach critical vaccination levels in India, a level of immunization, to stabilize the outbreak – and that is critical to economic growth.
The median growth forecast for the three months between April and June is 21.6% – after an earlier estimate of 23%, Reuters reported. For the full 2022 financial year, the median forecast has fallen from an earlier estimate of 10.4% growth to an expansion of 9.8%.
India is the second worst infected country in the world after the US. More than 28 million cases and over 329,000 deaths have been reported.
The expected growth is a “cold consolation” for India
The forecast growth rate for the March quarter “will be cold consolation for India, which pulled back as the resurgence of COVID forced another wave of decline in activity,” wrote Lavanya Venkateswaran, an economist at Mizuho Bank, on a Monday note.
The real focus will be on how India manages to get its economy back on its feet in the second half of the calendar year after the expected setback in the current quarter, explained Venkateswaran.
She added that the scarring effects on the country’s informal economy and banking sector, which were already capital constrained and weighed down with sub-par assets, are of major concern.
Covid-19 cases in India began to rise in February and the daily infection rate accelerated and peaked in April and May The second wave forced most of Indian industrialized nations to take localized lockdown measures to slow the spread of the virus.
Although cases have hit record highs and the number reported on a daily basis falls below 200,000, there are concerns about their speedy transmission in rural India, where experts say the health infrastructure is ill-equipped to handle an increase in the number of patients.
Eyes on reviews
The second half of the year is crucial for India to improve its Covid-19 vaccination program Minimize the effects of a likely third wave of infections, economists have said.
“Ultimately, it comes down to vaccinations,” said Frederic Neumann, co-head of Asian economic research at HSBC, on Monday to CNBC’s “Squawk Box Asia”. “We need to reach critical levels of vaccination, immunization levels, in India to stabilize the outbreak – and that is critical to economic growth.”
Neumann added that based on trends seen over the past year, the Indian economy tends to recover quickly once virus cases peak. He expects the situation to improve by the end of the September quarter.
According to Kaushik Das, chief economist for India and South Asia at Deutsche Bank, a robust vaccination campaign can also reduce the risks associated with a possible downgrade in Indian country ratings, which has become a problem with investors.
Rating agencies have stated that they do not see any imminent changes in Indian country ratings yet. They expect the economic impact of the second wave to be limited to the June quarter, and predict that it is unlikely to be as severe as last year when India imposed a month-long national lockdown.