S&P reduces India’s growth forecast for this fiscal to 9.5%

NEW DELHI: S&P Global Ratings on Thursday cut India’s growth forecast for the current fiscal to 9.5%, from 11% earlier, and warned of risk to the outlook from further waves of Covid pandemic. The agency lowered the growth outlook saying that a severe second Covid-19 outbreak in April and May led to lockdowns imposed by states and sharp contraction in economic activity. “We forecast growth of 9.5% this fiscal year from our March forecast of 11 per cent,” S&P said.

Stating that permanent damage to private and public sector balance sheets will constrain growth over the next couple of years, it projected India’s growth at 7.8% in the next fiscal ending March 31, 2023. “Further pandemic waves are a risk to the outlook given that only about 15% of the population has received at least one vaccine dose so far, although vaccine supplies are expected to ramp up,” S&P said.

GDP growth in the current fiscal was estimated to be in double digits initially, but a severe second wave of pandemic has led to various agencies cut growth projections.

Earlier this month, the Reserve Bank of India too cut India’s growth forecast to 9.5% for this fiscal, from 10.5% estimated earlier. It said manufacturing and exports were less severely affected compared with 2020, but services were acutely disrupted.

Consumption indicators such as vehicle sales fell sharply in May 2021 and consumer confidence remains downbeat.

“The economy has turned a corner now. New Covid-19 cases have been falling consistently and mobility is recovering. We expect this recovery to be less steep compared with the bounce in late 2020 and early 2021,” it said.

S&P said households are running down saving buffers to support consumption and a desire to rebuild saving could hold back spending even as the economy reopens.

“Monetary and fiscal policies will remain accommodative but new stimulus will not be forthcoming,” it added.

S&P PROJECTED INDIA’S GROWTH AT 7.8% IN THE NEXT FISCAL YEAR