ICRA cuts its FY22 GDP estimate by 0.5%, sees economy expanding by 10.5%

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Mumbai: Domestic rating agency ICRA on Tuesday cut its 2021-22 growth estimate by 0.5% on the upper end, as a newer spate of lockdowns and restrictions get imposed in pockets to arrest the rising COVID-19 cases.

The agency now expects the economy to grow 10-10.5% in 2021-22, against the 10-11% estimated earlier. Starting with Maharashtra, a slew of other pockets in the country like Delhi have been taking to localised lockdowns to arrest the climbing COVID-19 cases, which derails economic activity.

“For Q1 FY2022 (April-June 2021), we had earlier expected a GDP expansion of 27.5%, boosted by the low base.

“With the unprecedented surge in cases and evolving restrictions, the pace of GDP growth in the ongoing quarter may be tempered to 20-25%,” the agency said.

Low consumer confidence

The recent surge in COVID-19 cases has resulted in a dip in consumer confidence and reignited uncertainty regarding the near-term outlook, it said.

In sequential terms, the momentum eased for domestic airlines’ passenger traffic in March 2021, it said.

The report added that there are indications of a similar slackening in April 2021 in vehicle registrations, electricity demand and generation of GST e-way bills, reflecting the impact of the rise in infections and growing restrictions.

In March, the economic activity recorded a broad-based and sharp improvement in the pace of y-o-y growth, relative to the previous month. It reflected the low base related to the commencement of the COVID-19 pandemic, the early restrictions and the subsequent nationwide lockdown in March 2020, the agency said.

“However, this offers limited solace in light of the recent rise in coronavirus infections in India, and the proliferation of restrictions that is currently underway,” it made clear.

Covid impact

Meanwhile, Nomura, a Japanese brokerage on Monday said the ‘Oxford Stringency Index’ for India has risen to 69.9 as of April 13, from a recent low of 57.9 at the start of the month, reflecting the pan-India spread of the lockdown.

The brokerage’s proprietary business resumption index dipped to 90.4 for the week ended April 11, from 93.7 in the previous week, suggesting that the economy is currently tracking 9.6 percentage points below its pre-pandemic normal.

A key reason for that has been a dip in the mobility indicators, which have taken a hit following the rise in cases and the localised restrictions, it said.

The brokerage maintained its gross domestic product (GDP) growth estimate of 12.6%, which was recently revised down.