High commodity prices have boosted the value of India’s exports, which have hit a record $95 billion in the first quarter of 2021 and outbound trade is likely to lead the country towards a recovery after the pandemic’s ‘one-two punch’ hit the economy, Moody’s Analytics said in a report on Monday.
Stating that India is struggling to accelerate COVID-19 vaccination, the firm reckoned that ‘herd resilience’ — when 65% of the population is fully immunised — is now expected in the fourth quarter of 2022. Only Indonesia, Philippines and Thailand are expected to reach those levels of vaccination later, among India’s peers in the region. In an economic outlook report on the Asia Pacific Region titled ‘The Delta Roadblock’, the financial intelligence firm said the delta variant of COVID-19 is among the key factors adversely affecting economies, although the setback from the current set of movement restrictions will not be as severe as in the second quarter of 2020.
‘Exports, a lifeline’
“Our forecasts for the third quarter across much of APAC are revised lower, but some recovery is expected in the fourth quarter,” it said, terming exports a lifeline for the region which are now well above pre-pandemic levels and continued to rise in the April-June quarter.
“Even in India and Indonesia, where exports make up relatively small shares of the economy, high commodity prices have boosted the value of exports. This is one factor that helped reinvigorate India after its first devastating wave of COVID-19,” the firm said in its report.
While India’s second wave, now coming to an end, ‘may have more lasting damage to the economy as the pandemic’s one-two punch hit small enterprises very hard, exports will once again be the foundation for recovery’, it said.
Struggles to contain COVID-19 create considerable downside risks for countries like India, in the second half of 2021 and going into 2022, Moody’s Analytics warned, and attaining pre-pandemic level growth rates may have to wait till the next year.
“[India has] suffered lengthy economic shutdowns, accompanied by only modest fiscal support provided to SMEs and low-income households, that could lead to very deep and lasting scarring as they struggle to reopen businesses, pay back loans, or find employment as the economy finally recovers,” it concluded.
