The resurgence of COVID-19 infections in India, combined with partial lockdowns and the slow pace of vaccinations poses a big risk to a strong economic rebound, although the country may still register double-digit growth in 2021, Moody’s Investors Service said on Tuesday.
In a note on India’s sovereign rating, the global agency said the second wave of infections presented a risk to its 2021-22 GDP forecast of 13.7% growth, ‘as the reimposition of virus management measures will curb economic activity and could dampen market and consumer sentiment’.
‘Retail activity drops’
“Retail and recreation activity across India had dropped by 25% as of 7 April compared with 24 February, according to Google mobility data,” Moody’s noted. “This was mirrored in the Reserve Bank of India’s March consumer confidence survey which showed a deterioration in perceptions of the economic situation and expectations of decreased spending on non-essential items,” it said.
India had recorded its highest daily surge in new COVID-19 infections since the start of the pandemic on April 11, pushing its active case load further past 1 million, the agency pointed out, stressing that the vaccination roll-out will be critical in managing the second wave in a manner that balances ‘virus management against maintaining economic activity’.
Despite the fresh risks, the rating agency said India’s GDP is still likely to grow in the double digits in 2021 given the low level of activity in 2020. “Given the focus on ‘micro-containment zones’ to deal with the current wave of infections, as opposed to a nationwide lockdown, we expect that the impact on economic activity will be less severe than that seen in 2020.
“India’s very low coronavirus death count (about 1,70,179 deaths have been recorded as of 12 April) and relatively very young population also help mitigate risks,” it said.
