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Indian economy: S&P projects 11% GDP growth in FY22

Indian economy: S&P projects 11% GDP growth in FY22

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Virendra Pandit 

New Delhi: S&P Global Ratings has become the latest entity, apart from the International Monetary Fund (IMF) and Moody’s, to forecast double-digit growth in India’s Gross National Product (GDP) in 2021-22, but it also flagged the “substantial” impact of broader lockdowns on the economy, amid a surging second wave of Covid-19.

The control of pandemics remains a key risk for the economy. New infections have spiked in recent weeks and the country is in the middle of a second pandemic wave, it said in its report on Asia-Pacific Financial Institutions.

“Our forecast growth of 11 percent for India in 2021 is followed by a 6.1 per cent-6.4 percent forecast increase for the next couple of years… Some targeted lockdowns have already been implemented and more will likely be needed. The impact of broader lockdowns on the economy could be substantial, depending on their length and scope,” the report said.

S&P, which currently has a ‘BBB-‘ rating on India with a stable outlook, has forecast an 11 percent growth in the Indian GDP for FY22 due to a fast economic reopening and fiscal stimulus. The Indian economy had contracted 8 percent in 2020-21 fiscal, which ended March 31, 2021.

Last week, another global rating agency Moody’s Investors Service had said the second wave of Covid-19 infections presented a risk to India’s growth forecast, but double-digit GDP growth is likely in 2021 given the low level of activity last year.

Currently, India is in the grip of the pandemic’s second wave and recorded over 3.14 lakh new infections and 2,104 deaths in 24 hours ended Thursday morning. Active Covid-19 cases in the country soared to over 22.91 lakh.

In its report, S&P said credit conditions have improved for Asia-Pacific banks over the past quarter. Economies are recovering smartly, countries are rolling out vaccinations, and regional financing circumstances remain supportive.

And yet, the pandemic has seriously set back the finances of households and corporates, with deeply negative effects on lenders, S&P said. It expects banks may need years to fully recover.

Governments in the Asia-Pacific Region had tried to blunt the pandemic’s economic effects by offering an unprecedented level of fiscal and monetary policy support for households and corporates and measures to encourage banks to lend and show forbearance toward stressed borrowers.

“Public authorities will likely continue to have a key effect on banking sector creditworthiness over the next six to 18 months. They must maintain a delicate balancing act of not withdrawing support too early or, alternatively, not overshooting,” S&P added.

 

 

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