2nd Covid-19 wave heightens downside risks to GDP: S&P

Rating agency Standard & Poor's (S&P) on Wednesday said the second Covid-19 wave, which has engulfed India, brings uncertainty and a drawn-out outbreak will impede India's economic recovery.

This may need a revision of the base assumption of 11 per cent growth over fiscal 2021-2022, particularly if the government is forced to reimpose broad containment measures, according to S&P.

It said the country is already facing a permanent loss of output compared to its pre-pandemic days, suggesting a long-term production deficit equivalent to about 10 per cent of gross domestic

GDP to grow at 11% this fiscal: ADB

ADB on Wednesday said the Indian economy is projected to grow at 11 per cent in the current financial year on the back of the strong vaccination programme, but cautioned that second wave of COVID is worrying. “India’s economy is expected to grow 11 per cent in FY21. However, the recent surge in Covid-19 cases may put this recovery at risk,” said the Asian Development Outlook 2021.

product (GDP).

In addition to the substantial loss of life and significant humanitarian concerns, the coronavirus pandemic heightens the possibility of business disruptions, it added. The negative credit spillovers to rated portfolios remain limited, but the situation is fluid.

As daily infection cases exceed 0.3 million, the outbreak is putting severe pressure on the country's health infrastructure. The high absolute number of infections in India also presents a significant contagion risk to other geographies, it said.

It added, the strong economic growth will be critical to sustain the government's aggressive fiscal stance put forth within India's latest national Budget, and to stabilise its high debt stock relative to GDP.

The pace and scale of the post-crisis recovery will have important implications for the sovereign credit rating, it added.