S&P Global Ratings on Thursday cut India’s growth forecast for FY22 to 9.5 per cent from 11 per cent earlier. The agency also warned of risk to the outlook from further waves of COVID-19. S&P said that the severe second wave that led to local lockdowns in April and May sharply contacted economic activity. “We forecast growth of 9.5 per cent this fiscal year from our March forecast of 11 per cent,” it said.
S&P said that permanent damage to private and public sector balance sheets will constrain growth over the next couple of years. For the next fiscal ending March 31, 2023, the agency projected India’s growth at 7.8 per cent.
“Further pandemic waves are a risk to the outlook given that only about 15 per cent of the population has received at least one vaccine dose so far, although vaccine supplies are expected to ramp up,” S&P said.
The agency said that households are running down saving buffers to support consumption and a desire to rebuild savings 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.
As the country battled the first wave in FY21, Indian economy contracted by 7.3 per cent against a growth of 4 per cent in FY20.
GDP growth in the current fiscal was estimated to be in double digits initially, but a severe second wave has led various agencies to cut growth projections. RBI, too, cut India’s growth forecast to 9.5 per cent for this fiscal from 10.5 per cent estimated earlier.
Also read: India’s GDP contracts 7.3% in FY21; grows at 1.6% in Q4
Also read: ICRA projects India’s FY22 GDP growth at 8.5%
