Second wave poses downside risks to India’s growth: S&P

NEW DELHI: S&P Global Ratings on Wednesday said the second wave of Covid infections poses downside risks to India’s gross domestic product (GDP) and heightens the possibility of business disruptions.

The second wave brings in uncertainty and a drawn-out Covid outbreak will impede India’s recovery, it said.

“This may prompt us to revise our base-case assumption of 11% growth over 2021-22, particularly if the government is forced to reimpose broad containment measures,” S&P said in a statement.

Last week another global rating agency Fitch had projected India’s economic growth in current fiscal at 12.8%, while Moody’s Investors Service had earlier this month said the second wave of Covid infections presents a risk to India’s growth forecast, but a double digit GDP growth is likely in 2021 given the low level of activity last year.

As per official estimates, Indian economy contracted 8% in 2020-21, which ended March 31, 2021.

S&P said the country already faces a permanent loss of output versus its pre-pandemic path, suggesting a long-term production deficit equivalent to about 10 per cent of GDP, it added.

“India’s escalating second wave of Covid-19 infections is serious. In addition to the substantial loss of life and significant humanitarian concerns, S&P Global Ratings believes the outbreak poses downside risks to GDP and heightens the possibility of business disruptions,” it said.

India reported a record 3,60,960 new infections on Wednesday, bringing its total to over 1.79 crore. Deaths also rose by a record 3,293 to 2,01,187.

S&P said, the high absolute number of infections in India also presents a significant contagion risk to other geographies and the outbreak is putting severe pressure on the country’s health infrastructure.