Lockdowns to hit growth, pull down FY22 GDP

0 0
Read Time:2 Minute, 48 Second


Country-wide localised lockdowns due to a spike in Covid-19 cases is likely to hit India‘s GDP growth particularly in the quarter ended June, delaying the fragile economic recovery and likely pulling down economic growth for the fiscal year, economists said.

HSBC expects India’s year on year GDP growth to fall back into negative territory after recording a marginal 0.4% increase in the quarter ended December 2020. Moreover quarter on quarter GDP in the three months ended June 2021 could again contract.

“The growth cost of these lockdowns could be about 1% of the country’s GVA in the June quarter and could rise further, if they are extended or replicated by other states. Our recovery tracker has already fallen by 10 percentage points from the February high. Urban unemployment rates are on the rise, and high-touch services have been impacted, while the goods trade has held on a shade better,” HSBC chief India economist Pranjul Bhandari said in a report.

HSBC expects March quarter GDP to shrink 2.3% year on year versus a 0.4% growth in previous quarter. The negative momentum will continue in the first quarter ended June 2021 as quarter on quarter GDP growth will be negative though year on year growth could still be positive due to a statistical base effect after a -24.4% degrowth in the same quarter last year.

Though economists are yet to revise their fiscal 2022 GDP forecasts, they acknowledge downside risks to their projections.

Standard Chartered chief India economist Anubhuti Sahay said that India’s growth is likely to be hit particularly in the first quarter of the fiscal as states roll out stricter movement restrictions.

“Expectations were that the first quarter GDP will grow at more than 20% but that number could be lower. The pace of recovery will also depend on the duration of the second wave and proportion of population which gets vaccinated over next few quarters. We expect the second half of the fiscal to be better than the first but it all depends on how this wave peaks and the what percentage of the population are vaccinated by the second half of the year,” Sahay said.

Bank of America chief India economist Indranil Sengupta expects GDP to be hit by upto 300 basis points this fiscal, though he has not yet changed his forecast of 9% growth this fiscal. One basis point is 0.01 percentage point.

“Our calculations are that every month of lockdown impacts GDP growth by 100 to 200 basis points. Given that we are seeing more than 3 lakh cases this time when at last year at peak we were seeing 1 lakh and cities like Mumbai witnessing 11,000 cases when last year there were 2500 cases, it is likely that we could see more prolonged restrictions which could hurt growth more deeply,” Sengupta said.

Even as localised lockdowns hit growth, inflation is likely to remain above 4% due to passing of higher input costs by companies, disruption in informal sector and pent up demand which could challenge both the RBI’s resolve to exit easy monetary policy and hurt fiscal finances.

“Fiscal finances may face a three-front challenge, led by a rise in the demand for social welfare schemes, weaker tax revenues, and uncertainties about asset sales,” Bhandari said.



Source link

Happy
0 %
Sad
0 %
Excited
0 %
Sleepy
0 %
Angry
0 %
Surprise
0 %
Tagged bank of america, GDP growth, HSBC, , lockdowns

Average Rating

5 Star
0%
4 Star
0%
3 Star
0%
2 Star
0%
1 Star
0%
(Add your review)

Leave a Reply

Your email address will not be published. Required fields are marked *

Close