Double-digit in March, single-digit in May: Journey of India’s growth estimates

Double digits in March have given way to single digits in May. Experts spent the January-March quarter forecasting and analysing how the Indian economy would stage a V-shaped recovery following the COVID-crippled FY21, a year in which the economy is estimated to contract by as much as 7.7%.

The outlook was positive till a few days in April, when the second surge of the infection shocked everyone.

Till March most of the organisations and agencies from the International Monetary Fund to Moody’s said the Indian economy will clock double-digit growth in FY22 leaving the memories of FY21 behind.

Mood of Moody’s

“The reimposition of lockdown measures will curb economic activity and could dampen market and consumer sentiment. However, we do not expect the impact to be as severe as during the first wave…. Unlike the first wave where lockdowns were applied nationwide for several months, the second wave “micro-containment zone” measures are more localized, targeted, and will likely be of shorter duration. Businesses and consumers have also grown more accustomed to operating under pandemic conditions,” said global rating agency Moody’s as it proceeded to revise its 13.7% growth projection for the economy to a more sober 9.3%.

According to Moody’s the adverse effect of the second surge will be substantially limited to the first quarter of FY22.

Deepening lockdowns

From its mid-January report when it projected an 11% growth rate for FY22, Fitch Ratings revised the estimate to 9.5%. Like Moody’s its revision was based on the huge daily addition to caseloads – upwards of 3-4 lakh – and the increasing deepening and widening of the lockdowns.

Crisil tempered its earlier expectation of an 11% growth rate to 8.2%. However, it laced its comments with the hope that if the peak of the infection by mid-May, the economy might be restored to the pre-pandemic levels by September.

In the first week of this month, S&P Global Ratings also issued sober estimates about the India growth story in FY22 bringing it down from the 11% projection made earlier to 9.8%.

S&P, too, said that it anticipated recovery in the latter part of the year.

Hobbled vaccination

The rise of the pandemic in 2021 coincided with the much-discussed vaccination programme being hit by production constraints. While the country ideally needs 120 crore vaccines a month to inoculate all adults with two jabs, even with ramped-up capacities it would have 11.5 crores or less than 10% of the requirement.

In the third week of April, when the second wave was yet to manifest in its most destructive form, Care Ratings also slashed its projections but not to the extent other rating agencies did. It brought down the GDP growth projections for FY22 from 11%-11.2% made on March 24 to 10.2%.

View from Japan

With the daily infection rate in India crossing 4 lakh and daily fatalities surpassing 4,000, Japanese broking major Nomura Securities revised outlook and pared growth projections from 12.6% to 10.8%.

In December 2020, Nomura Securities predicted in the Asia Outlook 2021 report that India would put China and Singapore behind to emerge as the fastest growing economy in Asia.

China and Singapore would grow at 9% and 7.5% during the calendar year, Nomura estimated. It added that India might be on the cusp of a cyclical recovery.

UNCTAD sober

In March of all the global bodies that made forecasts about the Indian economy, In a report on March 18, the UN Conference on Trade and Development said that the economy would witness a “stronger recovery” in 2021 and grow by 5%, climbing out of a contraction in 2020.

Major Indian bodies and organisations, however, have preferred to wait and watch and not put out any revised estimates even as the second wave continues to ravage most of the big states. Reserve Bank of India, State Bank of India,

Domestic silence

The Economic Survey by the Centre that was tabled in the Parliament on January 29 put the prospect of economic growth at 11%. Despite the optimism to stage a V-shaped recovery, the survey also warned that it might take the economy a couple of years to return to the pre-pandemic GDP levels.

In the first week of February, the Reserve Bank of India pegged the growth at 10.5%.

The country’s biggest bank State Bank of India put the growth prospects of GDP at 11% in 2021-22. On February 10, it also said that it cannot fall below that rate.

However, SBI also cautioned that its projections were based on the assumption that COVID-19 infections won’t rise.