India Ratings and Research (Ind-Ra) on Friday revised down FY22 real GDP growth forecast to 10.1 per cent from earlier projection of 10.4 per cent, mainly due to the second wave of Covid-19 infections and slower pace of vaccination.
The revision assumes the second wave of pandemic to start subsiding by mid-May.
Ind-Ra said the impact of second wave will not be as disruptive as the administrative response is likely to be confined to regional/local lockdowns and containment zones.
Moreover, unlike the first wave, the administrative response is not abrupt and is unfolding gradually in a graded manner.
Besides, households, businesses and other economic agents are better prepared and there is a significant amount of learning by doing, which can help them withstand and navigate through the second wave of crisis.
Lastly, the rollout of Covid-19 vaccine since January 16 will enhance safety and reduce fear element among vaccinated economic agents.
Ind-Ra said rural demand is likely to remain resilient in view of good rabi harvest and prospects of a near normal monsoon forecast for 2021 by the India Meteorological Department.
Although urban demand is still recovering and may get adversely impacted by the second wave of infections, the demand from contact-intensive sectors is likely to strengthen due to the ongoing vaccination drive.
The demand-side component of GDP namely private final consumption expenditure, government final consumption expenditure and gross fixed capital formation are now expected to grow at 11.8 per cent, 11 per cent and 9.2 per cent respectively in FY22 as against the earlier forecast of 11.2 per cent, 11.3 per cent and 9.4 per cent respectively.
Real GDP in FY22 is estimated to come in at Rs 148.2 lakh crore which is 10.7 per cent lower than FY22 GDP trend value. Consumption slowdown is estimated to contribute 63.4 per cent of the decline followed by investment 47.7 per cent, said Ind-Ra.
( With inputs from ANI )
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