Barclays lowered its growth forecast for the ongoing fiscal to a single-digit figure of 9.2% from 10% earlier. Similarly, SBI Research saw FY22 growth in single digits against its earlier projection of 10.4%, although it did not provide a specific number.
The Indian economy could be staring at a loss of about Rs 5.4 lakh crore ($74 billion) as the economic cost of lockdown restrictions on account of the second wave of Covid-19 was climbing rapidly, said a Barclays report on Tuesday.
While this represented a 2.4% hit to the country’s gross domestic product (GDP), the second wave impact could result in a GDP loss of up to Rs 4.5 lakh crore, according to a State Bank of India (SBI) Research report released the same day.
“After factoring in recent developments and new restrictions, we now estimate that the economic cost of the latest shutdowns has increased to about USD8bn a week in May from USD5.3bn a week in the last two weeks of April,” said Rahul Bajoria, Barclays’ chief India economist, in the report.
Barclays lowered its growth forecast for the ongoing fiscal to a single-digit figure of 9.2% from 10% earlier.
Similarly, SBI Research saw FY22 growth in single digits against its earlier projection of 10.4%, although it did not provide a specific number.
International experience highlighted a lower impact to GDP from declining mobility in the second round of the infection, but the major impact to India’s output is likely to come through the health sector, according to SBI Research.
“We believe that in this wave, our health crisis overwhelmed us. And hence, the impact on GDP in the second wave will be more from the health channel than the mobility channel,” said Soumya Kanti Ghosh, SBI group chief economist, in the report.
However, the peak of the health crisis appeared to have passed as daily Covid-19 cases declined 22% sequentially in the week ended May 23, compared to a 15% fall a week earlier, along with a weekly drop in the test positivity rate to 13.1% from 18.8%, according to a Crisil report.
“Taking together the decline in new cases, positivity rate and active cases, coupled with improving recovery rate, the country as a whole may have crossed the peak of the second wave on May 6, when 4.14 lakh cases were recorded,” Crisil said.
Daily fresh cases fell below the 200,000 mark for the first time since April 14, at 196,427 on Monday even as daily fatalities remained elevated at 3,511.
This pointed to a flattening out of the decline in economic activity as evidenced by a 0.1% weekly contraction, in the Daily Activity and Recovery Tracker (DART) index, compiled by QuantEco Research, the slowest fall in two months, the firm said in a report on Tuesday.
Going forward, the recovery is likely to be U-shaped, compared to the V-shaped recovery last year, as states will be guarded about easing restrictions with the exit from state-wide lockdowns likely to be heterogeneous come June, QuantEco Research said.
Further, the slow pace of India’s vaccination drive increased the risk of a third wave, according to Barclays. As of May 23, daily vaccinations reduced to about 980 per million people from around 1,455 per million a week earlier.
“In a more pessimistic scenario in which the country is hit by a third wave of COVID-19 infections, we estimate that the economic costs could rise by at least a further USD42.6bn,” the Barclays report said, putting FY22 growth at 7.7%.