MUMBAI: Investment bank Barclays on Friday revised downward its growth projection for India in FY21 to a contraction of 6% from a contraction of 3.2% estimated earlier. India’s rising coronavirus infection curve is weighing on its growth prospects despite surge in testing and some success in curbing spread of the pandemic in mega cities, the Barclays said.

For the June quarter, Barclays expects GDP to shrink by 25.5% followed by 8% decline in September quarter. It projects growth recovery in second half of FY21 to be shallower, at around 4.3% against 6.3% estimated earlier, largely because of more tempered expectations for recovery in private consumption and private investment. For FY22, it revised its growth projection down to 7% from 7.4% estimated earlier.

The Reserve Bank of India’s Survey of Professional Forecasters on Macroeconomic Indicators released last week showed GDP may contract 21.5% in June quarter and 5.8% in FY21 before bouncing back to grow at 7.4% in FY22.

“Rural consumption is likely to be supportive, but will play only a mitigating role. With covid-19 spreading into India’s hinterland, state governments are imposing local lockdowns to curb activity. Rural unemployment, which fell consistently in June and July, started to rise in early August. While the sowing of crops remains robust, boosting demand for tractors and fertilisers, the progress of the key driver of the agricultural sector—monsoon rainfall—has turned less supportive,” Barclays said in a note published on Friday.

India now has the fastest growing number of covid-19 cases and deaths globally, displacing the US and Brazil. With close to 2.5 million cases, India ranks third in cases globally, but the gap between India and Brazil looks set to close over the next few weeks.

“The silver lining for India remains its low mortality rate and high recovery rate. As of 13 August, more than 70% of those infected had recovered, and the country’s mortality rate had fallen below 2% amid a significant increase in testing,” Barclays added.

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