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Investment bank Barclays on Friday lowered its expectations of India\u2019s gross domestic product (GDP) growth for FY21 from -3.2% estimated earlier to a contraction of 6%. Barclays held that India\u2019s rising coronavirus infection curve is weighing on its growth prospects despite a surge in testing and some success in curbing the spread of the pandemic in mega cities. <\/p>\n
For the June quarter, Barclays expects GDP to shrink by 25.5%, followed by a 8% decline in the September quarter. It projects growth recovery in the second half of the financial year to be shallower, at 4.3% against the 6.3% estimated earlier, largely because of more tempered expectations for recovery in private consumption and private investment. <\/p>\n
For FY22, it revised its growth projection down to 7% from 7.4% estimated earlier. <\/p>\n
Reserve Bank of India\u2019s Survey of Professional Forecasters on Macroeconomic Indicators released last week showed that GDP may contract 21.5% in the June quarter and 5.8% in FY21 before bouncing back to grow at 7.4% in FY22. <\/p>\n
\u201cRural consumption is likely to be supportive, but will play only a mitigating role. With covid-19 spreading into India\u2019s hinterland, state governments are imposing local lockdowns to curb activity. Rural unemployment, which fell consistently in June and July, started to rise in early August. While the sowing of crops remains robust, boosting demand for tractors and fertilisers, the progress of the key driver of the agricultural sector, monsoon rainfall, has turned less supportive,\u201d Barclays said in a note published on Friday. <\/p>\n
India now has the fastest growing number of covid-19 cases and deaths globally, displacing the US and Brazil. <\/p>\n
With close to 2.5 million cases, India ranks third in cases globally, but the gap between India and Brazil looks set to close over the next few weeks. <\/p>\n
\u201cThe silver lining for India remains its low mortality rate and high recovery rate. As of 13 August, more than 70% of those infected had recovered, and the country\u2019s mortality rate had fallen below 2% amid a significant increase in testing,\u201d Barclays said. <\/p>\n
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