India’s economy will grow at a faster rate during this fiscal year than previously thought, according to a Reuters poll of economists who warned that a surge in coronavirus cases was the greatest risk for the growth.
Downside risks remain high as daily reported coronavirus cases peaked since Oct. 11 on Thursday and a few states renewed restrictions, although continuing the vaccination campaign may avoid a full lockdown.
The poll from March 26 to April 1 showed that economists are now expecting a record growth of 27.0% this quarter after growing just 1.5% between January and March, down from 21.1% and 1, 0% previously planned.
It would then increase by 10.0% in the next quarter and by 5.9% and 6.0% over the following two quarters. These forecasts were an increase of 9.1%, 5.9% and 5.5% respectively.
But nearly 70% of economists, or 31 out of 45, who answered a supplemental question said the biggest risk to the economy this fiscal year was an increase in coronavirus cases. Ten chose inflation.
“It is reasonably clear that the pandemic would get worse before it gets better, as has been the case in other countries. The economic damage could be much less given that strict lockdowns are unlikely,” Abhishek said. Upadhyay, Senior Economist at ICICI Securities.
“The greatest risk to economic recovery would be if there is more evidence of re-infections from new strains of the virus which are also found to be less deterrent with existing vaccines.”
With the third highest number of reported COVID-19 cases – more than 12 million infections – behind the United States and Brazil alone, India has so far injected 64 million doses of the vaccine.
However, the poll of more than 45 economists showed that Asia’s third-largest economy would grow by 11.0% in fiscal year 2021-2022 and 6.5% thereafter, compared with 9.5% and 6 , 0% expected in January. It probably contracted 7.5% in 2020-2021, compared to -8.0% previously forecast.
“India’s economy has been (one of) the hardest hit by COVID-19, but has also been (one of) the fastest to recover from the crisis,” said Prakash Sakpal , Senior Economist for Asia at ING.
“However, the second wave of the pandemic sets the stage for another bumpy race this year, as structural bottlenecks continue to dampen India’s economic potential for years to come.”
The risk of the pandemic significantly affecting economic growth this year was high, said 29 of 45 economists, including one who said it was very high.
“We recognize the downside risks to our FY22 GDP growth forecast if movement restrictions were to be tightened across the country,” noted Anubhuti Sahay, South Asia economic research manager at Standard. Chartered.
“However, it is too early to factor in the impact. The ‘shock and fear’ of FY21 is unlikely to be repeated this year.”
India on Thursday reversed its decision to cut interest rates to 1.1 percent on its state-backed small savings program. Small economies are the lifeblood of low and middle income groups, and a rate cut would have hit millions of people hard.
The RBI is expected to hike rates by 25 basis points in the first quarter of next fiscal year to 4.25%, against no change until at least 2023 previously forecast.
“While we wouldn’t expect another nationwide lockdown to be imposed, the RBI may want to keep its powder dry to ward off the potentially debilitating impact of the resurgence of the pandemic,” Kunal said. Kundu, Indian economist at Societe Generale.
Inflation was expected at 4.9% and 4.5% for the current year and next year, within the central bank’s target range of 2-6%, but 39 economists out of 44, in response to a additional question, said their price predictions were further biased. on the rise.