Wall Street broker Goldman Sachs lowered its estimate of India’s economic growth to 11.1% in the fiscal year through March 31, 2022, as a number of cities and towns States have announced lockouts of varying intensity to control the spread of coronavirus infections. India is suffering from the world’s worst outbreak of COVID-19 cases, with deaths exceeding 2.22 lakh and new cases above 3.5 lakh per day. This has led to a call for strict lockdowns nationwide to stem the spread of the virus – a move the Modi government has so far avoided following last year’s economic devastation through a similar strategy. .
Instead, he left it up to states to impose restrictions on handling the virus. Several states and cities have imposed lockdowns to varying degrees. “The intensity of the lockdown remains lower than last year,” Goldman Sachs said in a report. “Yet the impact of a stricter containment policy is clearly visible in the higher frequency mobility data in major Indian cities.” With the tightening of the containment policy, high-frequency data – especially on the services side – has taken a hit. The manufacturing side – as indicated by high-frequency data on electricity consumption and April’s stable manufacturing PMI – has been more resilient.
Labor market indicators suggest that the daily unemployment rate has increased slightly in recent weeks, but the impact on employment is so far much more contained than in April-June last year. “Overall, most indicators still suggest the impact was less severe than it was in the second quarter (April-June) of last year,” Goldman Sachs said.
Although the impact of the lockdown is much less severe than last year, recent declines in service indicators, including e-transport bills, mobility, rail freight and freight traffic, have led to lower estimates. of GDP. “While activity is expected to rebound quite sharply from the third quarter (July-September) – assuming restrictions can ease somewhat during this period – the net result is to bring our forecast for real GDP growth back to fiscal year 22 at 11.1% (vs. 11.7%).% previously), and our growth forecasts for calendar year 2021 at 9.7% (vs. 10.5%) ”, he said. he declares.
Goldman Sachs is not the first brokerage to downgrade GDP growth projections. While Nomura last month lowered economic growth projections for the current fiscal year (April 2021 to March 2022) to 12.6% from 13.5% earlier, JP Morgan predicts GDP growth of 11% vs. 13% earlier. UBS is forecasting 10 percent GDP growth, down from 11.5 percent previously, and Citi has downgraded growth to 12 percent.
India’s GDP growth was declining even before the pandemic hit last year. From a growth rate of 8.3% in fiscal year 2017, GDP expansion fell to 6.8% and 6.5% in the following two years and to 4% in 2019-2020 . In the COVID-ravaged 2020-2021 fiscal year (April 2020 to March 2021), the economy is expected to have contracted by up to 8%.
The RBI has projected GDP growth for fiscal 22 at 10.5%, while the IMF puts it at 12.5%. The World Bank forecasts 10.1% growth in 2021-2022. New confirmed cases are up sharply from 2 lakh a day two weeks ago. Active cases have risen to 34 lakh from 15 lakh two weeks ago. “The epidemic is spreading to other states such as Uttar Pradesh and Karnataka, with Maharashtra’s share of total active cases falling to 20 percent, from 60 percent a few weeks ago,” says the Goldman Sachs report. Tests have risen, as has the daily positive rate to 21.3%, from 13.1% two weeks ago.
“Medical infrastructure remains under severe pressure in many large cities with severe shortages of medical oxygen, blood plasma, key drugs and hospital beds,” he said. “Estimates from the government medical panel suggest cases could reach over 5.00,000 per day by mid-May.”
Goldman Sachs said there were early signs of a spike in the rate of change in the total number of active cases, although new cases and the rate of positive tests remain very high. On the vaccine front, India has vaccinated 12.6 crore beneficiaries with the first dose and 2.73 lakh beneficiaries with the second dose (9.3% of the total population received at least one dose) as of May 3.
“The vaccination rate has fallen to 23 lakh per day from 33 lakh per day two weeks ago, as major vaccine manufacturers point to production delays due to shortages of raw materials,” he said. . “However, these production delays will likely be short-lived as the United States has eased restrictions on exports of vaccine raw materials to India.”
Goldman Sachs said recent developments suggest the pace of vaccination could accelerate significantly in the coming months. The government also recently expanded vaccine eligibility to allow all adults over 18 as of May 1. “Given these changes, our health analysts expect vaccine supply to improve significantly in the second half of 2021,” he said. “With an increased vaccine supply and a larger eligible population pool, we now expect the country to be able to immunize two-thirds of its total population by Q1-2022 from Q2-2022 previously.”
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