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Tag: Indian economy 2021

  • Moody’s cuts India development forecast for 2021 to 9.6%

    Moody’s Investors Service on Wednesday slashed India’s development projection to 9.6 per cent for 2021 calendar yr, from its earlier estimate of 13.9 per cent, and stated quicker vaccination progress might be paramount in proscribing financial losses to June quarter
    In its report titled ‘Macroeconomics India: Economic shocks from second COVID wave will not be as severe as last year’s’, Moody’s stated high-frequency financial indicators present that the second wave of COVID-19 infections hit India’s financial system in April and May. With states now easing restrictions, financial exercise in May is prone to signify the trough.
    “The virus resurgence adds uncertainty to India’s growth forecast for 2021; however, it is likely that the economic damage will remain restricted to the April-June quarter. We currently expect India’s real GDP to grow at 9.6 per cent in 2021 and 7 per cent in 2022,” Moody’s stated.
    Earlier this month, Moody’s had projected India to clock a 9.3 per cent development within the present fiscal ending March 2022, however a extreme second COVID wave has elevated dangers to India’s credit score profile and rated entities.

    Indian financial system contracted by 7.3 per cent in fiscal 2020-21 because the nation battled the primary wave of COVID, as towards a 4 per cent development in 2019-20.
    Stating that stringent lockdowns in economically important states will mar April-June quarter financial exercise, Moody’s stated the ten states which have been hardest hit by the second wave collectively account for greater than 60 per cent of the pre-pandemic degree of India’s GDP.
    Four states – Maharashtra, Tamil Nadu, Uttar Pradesh and Karnataka – contributed the most important shares amongst all states in monetary yr 2019-20.
    Moody’s stated quicker vaccination progress might be paramount in proscribing financial losses to the present quarter. As of the third week in June, solely about 16 per cent of the inhabitants had acquired one vaccine dose; of these, solely about 3.6 per cent had been totally vaccinated.
    “Mobility and economic activity will likely accelerate in the second half of the year as the pace of vaccinations pick up. The government recently announced a strategy to centralise vaccine procurement in order to boost vaccinations, which if successful, will support the economic recovery,” it added.
    Moody’s expects the general hit to India’s financial system to be softer than that through the first wave final yr. However, the tempo of restoration might be decided by entry to and supply of vaccines, and the energy of the restoration in personal consumption, which could possibly be hampered by the deterioration of stability sheets of low- and middle-income households from job, earnings and wealth losses.
    India’s second wave peaked at first of May; since then, new circumstances and each day deaths have continued to fall, and the quantity of people that have recovered from the virus has exceeded the variety of new infections since mid-May.

    India’s whole tally of COVID-19 circumstances crossed the three-crore mark with 50,848 new circumstances reported in 24 hours. The demise toll climbed to three,90,660 with 1,358 recent fatalities.
    “We assess the overall economic effect of the second wave to be softer than that during the first wave of the pandemic last year, although delivery of and access to vaccines will determine the durability of the recovery,” Moody’s added.

  • Economy exits recession as GDP grows 0.4% in Q3; Govt cautions pandemic threat persists

    THE INDIAN economic system emerged out of technical recession in October-December 2020 and grew 0.4 per cent with enchancment in manufacturing, development and agriculture.
    According to the second advance estimates launched by the National Statistical Office on Friday, the economic system will, nonetheless, face a deeper 8 per cent contraction for the total 12 months 2020-21, as towards the sooner estimate of seven.7 per cent.
    NSO’s second advance estimates are obtained by extrapolating indicators just like the Index of Industrial Production (IIP) of the primary 9 months of the monetary 12 months. The estimates have been prone to bear “sharp revisions” since knowledge assortment for IIP and CPI have been impacted attributable to restrictions imposed in March final 12 months in view of the pandemic.
    In an announcement, the Finance Ministry mentioned the Q3 numbers have been a mirrored image of the additional strengthening of a V-shaped restoration, however warned that India was not but out of the hazard of the pandemic.
    The GDP had contracted by 23.9 per cent and seven.5 per cent within the April-June and July-September quarters, respectively, marking a technical recession within the aftermath of the Covid-19 pandemic. The GDP charges for Q1 and Q2 have now been revised to (-)24.4 per cent and (-)7.3 per cent, respectively.
    In the third quarter, the manufacturing sector grew 1.6 per cent as towards a contraction of 1.5 per cent within the earlier quarter, and a pair of.9 per cent contraction in October-December 2019. The development sector additionally gained momentum, rising 6.2 per cent in October-December 2020, as towards a contraction of seven.2 per cent within the earlier quarter, and 1.3 per cent contraction throughout the identical interval final 12 months.
    The GDP progress estimate of 0.4 per cent for the third quarter this 12 months is greater than 0.1 per cent progress projected by the Reserve Bank of India. In the corresponding quarter final 12 months, the economic system had grown 3.3 per cent.
    Growth in agriculture picked tempo and jumped 3.9 per cent in October-December in contrast with 3 per cent progress in July-September and three.4 per cent progress in the course of the corresponding quarter final 12 months.
    Financial, actual property {and professional} companies grew 6.6 per cent as towards 9.5 per cent contraction within the earlier quarter and 5.5 per cent progress within the corresponding interval final 12 months.
    Mining, commerce, accommodations, transport, communication and broadcasting companies and public administration companies continued to remain within the adverse territory within the third quarter registering a contraction of 5.9 per cent, 7.7 per cent, and 1.5 per cent, respectively.
    Cumulatively, for April-September, the Indian economic system recorded a contraction of 10.4 per cent as towards 4.4 per cent progress final 12 months.
    Economists anticipated solely a gentle enchancment going forward, as a projection of 8 per cent contraction for the total 12 months implies a contraction once more within the fourth quarter. “Intriguingly, GDP is implicitly projected by the NSO to slip back into a contraction of 1.1 per cent in Q4 FY2021, which may be an unintended consequence of the back-ended release in the Government of India’s subsidies,” mentioned Aditi Nayar, Principal Economist, ICRA.

    “Various lead indicators have recorded a loss of momentum so far in Q4 FY2021, in contrast to the improvement in sentiment brought on by the vaccine rollout. We expect consumption growth to strengthen only modestly in the near term, as a part of the healthier income generation is used to rebuild the savings buffers that were drained during the lockdown by those in the informal sector, contact intensive industries, and the self employed,” she mentioned.
    The Finance Ministry mentioned the Q3 GDP numbers confirmed the success of the federal government’s preliminary coverage of “lives over livelihood”. “The sharp V- shaped recovery has been driven by rebounds in both Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) as a combination of astute handling of the lockdown and a calibrated fiscal stimulus has allowed strong economic fundamentals to trigger quick resumption of high activity levels in the economy,” it mentioned.
    It, nonetheless, mentioned India was not but out of the hazard of the pandemic. “Social distancing continues to be the most effective tool to combat the pandemic as activity levels continue to rise in the economy boosted by the rapidly escalating inoculation drive in the country,” it mentioned.
    The progress fee when it comes to gross worth added (GVA) — which is GDP minus web product taxes, and displays progress in provide — is seen contracting 6.5 per cent in 2020-21 as towards earlier estimate of seven.2 per cent and three.9 per cent within the earlier 12 months. GDP in nominal phrases, which elements in inflation, is estimated at (-)3.8 per cent within the second advance estimates, up from the primary advance estimate of (-)4.2 per cent.
    On the expenditure facet, gross fastened capital formation — an indicator for personal funding — picked up tempo to develop 2.6 per cent in October-December. Government last consumption expenditure contracted by 1.1 per cent in October-December, whereas different drivers of demand within the type of personal consumption expenditure contracted by 2.4 per cent.