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Asian Development Bank (ADB) cuts India’s growth projection to 10% for FY 2022

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The Manila-based multilateral funding agency had projected 11% growth for the third-largest economy in Asia, in April 2021

Amid the deepening monetary impact of the second wave of the Coronavirus pandemic on the Indian economy, the Asian Development Bank (ADB), on July 20, 2021, lowered the country’s growth forecast for FY 2022 to 10%. The multilateral funding agency had projected an 11% growth for the third-largest economy in Asia, in April 2021.

With this, ABD has joined the league of many global rating agencies and think-tanks that have reduced the growth projection for India, amid the COVID-19 second wave that disrupted the normalcy attained after the containment of the first wave.

“A second wave of the pandemic induced many state governments to impose strict containment measures. New COVID-19 cases daily peaked at more than 4,00,000 in early May, then fell to a little over 40,000 in early July,” the bank said in its Asian Development Outlook (ADO) Supplement.

“Early indicators show economic activity resuming quickly after containment measures eased. The growth projection for FY 2021 (ending March 2022), downgraded from 11% in ADO 2021 to 10%, reflects large base effects,” it added.

For the next fiscal ending March 2023, the Manila-headquartered funding agency has upgraded India’s growth forecast from 7% to 7.5%, as it expects economic activity to normalise amid much of India’s population getting vaccinated by that time.

Pointing to the overall growth in Asia, the ADB also said that the adverse economic impact of new waves was expected to be limited, with businesses and consumers better able to adapt to the pandemic and containment measures now, than they were a year ago.

“The GDP growth forecast for the sub-region in 2021 is downgraded from 9.5% to 8.9% but upgraded for 2022, from 6.6% to 7%,” the ADB said.

S&P cuts India’s growth forecast for FY 2022 to 9.5%

In March 2021, the agency had projected 11% growth for Asia’s third-largest economy

June 25, 2021: S&P Global Ratings, on June 24, 2021, lowered India’s growth forecast for FY 2022 to 9.5%, from its 11% growth prediction in March this year. The rating agency also indicated that further reductions in its growth forecast could not be ruled out, in the event of a third wave hitting the third-largest economy in Asia.

While attributing the cut in its growth outlook to the second wave of the Coronavirus pandemic that forced most states in India to impose fragmented lockdowns in April and May 2021, S&P said the severity of restrictions adversely hit economic growth in India.

Joining the league of global and domestic rating agencies and think-tanks that have reduced India’s growth estimates for the current fiscal in view of the second wave, S&P said that the permanent damage to private and public sector balance sheets would constrain growth over the next couple of years.

Recall here that banking regulator Reserve Bank of India has also lowered India’s growth forecast to 9.5% for FY 2022, from its previous growth projection of 10.5%. In May 2021, British brokerage firm Barclays lowered India’s growth forecast to 9.2%.  While Moody’s has projected India to grow at 9.3% in the current fiscal, the World Bank has lowered its economic outlook for India to 8.3% from its April outlook of 10.1%. At home, rating agency ICRA has had projected economic growth at 8.5%

While stating that newer waves of the virus spread pose a risk to India’s economic outlook, considering only 15% of the world’s second most populous country in the world have so far been covered under its inoculation programme, the rating agency also forecast India’s growth at 7.8% for FY 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.

Indian economy contracts by 7.3% in FY 2021

Asia’s third-largest economy reported a meagre growth of 1.6% in the fourth quarter of 2020-21 fiscal year.

June 1, 2021: In a clear indication that the Coronavirus pandemic has deeply impacted the growth potential of Asia’s third-largest economy, India reported a meagre growth of 1.6% in the fourth quarter (January-March) of the 2020-21 fiscal year. The adverse impact of the virus spread and a subsequent national lockdown become more prominent in the knowledge of the fact that growth remained affected during Q4, in spite of the government opening up all sectors of the economy during the three month period.

Overall, the Indian economy recorded a negative growth of 7.3% for 2020-21 (FY 2021), showed data released by the National Statistical Office (NSO) on May 31, 2021. The contraction in FY 2021 is, however, lower than the 8% contraction that the NSO had projected in its second revised estimates. The Reserve Bank of India (RBI) has, on the other hand, predicted a 7.5% contraction for FY 2021.

The extremely delicate state of India, the world’s second-hardest hit country, in terms of COVID-19 infections, could be gauged from the fact that this is the first full-year contraction in the last four decades, since the GDP shrank by 5.2% in 1979-80.

“The measures taken by the government to contain the spread of the COVID-19 pandemic have had an impact on economic activities, as well as on data collection mechanisms,” the NSO said in an official statement.

Recall here that in April-June 2020, the GDP shrunk by 24.38% but improved to 7.5% contraction in the July-September quarter, when the government started to open up the economy after a prolonged lockdown.

According to government data, gross value-added (GVA) growth in construction in Q4, grew by 14.5% from 0.7% growth earlier, as developers doubled efforts after the lockdown to complete ongoing works to meet a sharp rise in demand for real estate.  Similarly, financial, real estate and professional services grew by 5.4% in Q4 FY 2021 from 4.9% growth previously, primarily because of pent-up demand.

Barclays further cuts India’s FY 2022 growth forecast to 9.2%

The toll from the stringent COVID-19 lockdowns imposed by many big states seem to be having a greater economic impact than earlier expected, Barclays said

May 26, 2021: Rating agency Barclays, on May 25, 2021, lowered its full-year 2021-22 economic growth forecast for India by 80 basis points (bps) to 9.2%, attributing the cut to economic setbacks caused by the fragmented, yet prolonged state lockdowns, following the tremendous rise in infections in the second wave of the Coronavirus pandemic.

The toll from the severe lockdowns imposed by many big states, to curb the infection numbers, seemed to be making a greater economic impact than earlier expected, Barclays said. The brokerage company had earlier projected India to grow at 10%. Before the second outbreak, it had pegged GDP growth in FY 2022 at 11%.

“Although India’s second wave has started to recede, the related economic costs have been larger, owing to the more stringent lockdowns implemented to contain the outbreak,” it said in a note. “The second COVID-19 wave appears to have hit the country’s more affluent, city-dwelling, consumer population hard. As such, the economic losses are likely to be deeper, owing to reduced consumption and investment and could also threaten crop-sowing activity ahead of the monsoon season, which is due to begin across the country soon,” it added.

On May 26, 2021, total Coronavirus infections in India crossed 27 million with the addition of 2,08,921 new cases in the past 24 hours. Daily deaths from the virus spread rose by 4,157.

Barclays also said that it might further lower the growth projection for Asia’s third-largest economy by another 150 bps, to 7.7%, if the country was not able to curb the infections by way of speeding up the vaccination drive. Stating that India’s vaccination programme has slowed significantly, in the wake of persistent supply constraints and logistical challenges, the tardy speed of inoculation could pose medium-term risks to economic growth, especially if India experienced a third wave of the virus spread, it said.

Economists at the brokerage said India would suffer economic losses to the tune of at least USD 42.6 billion, if a third wave of the virus forces states to put in place equally severe lockdowns for a period of eight weeks.

Moody’s cuts India’s growth forecast for FY 2022 to 9.3% from 13.7%

Rating agency Moody’s has lowered India’s GDP forecast for FY 2022 to 9.3% but added that it expects a strong rebound in the second half of the year

May 12, 2021: Joining the league of rating agencies that have recently lowered their growth projections for the world’s third-largest economy, Moody’s, on May 11, 2021, revised India’s gross domestic product (GDP) forecast for FY 2022 to 9.3% from the earlier projection of 13.7% made in February this year.

While attributing this downgrade in projection to the negative impact of the devastating second wave of COVID-19 in the world’s second-most populous country, the US-based rating agency has also ruled out any imminent chances of a sovereign rating upgrade for India.

Note that India recorded 3,48,529 new Coronavirus infections on May 12, 2021, taking the over caseload tally to 2,33,40,938. Deaths from the virus increased again on May 11, 2021, to 4,200, the highest daily toll recorded in India, so far.

“As a result of the negative impact of the second wave, we have revised our real, inflation-adjusted GDP growth forecast down to 9.3% from 13.7% for fiscal 2021 (FY 2022),” the rating agency said.

The economic blow caused by a tremendous spike in the number of infections during the second wave of the Coronavirus, would not only impact India’s growth prospects in the short term but also have long term effects, Moody’s said, while also predicting a wider government fiscal deficit of 11.8% of GDP in FY 2022, as compared to a previous forecast of 10.8%.

“As of now, we expect the negative impact on economic output to be limited to the April to June quarter, followed by a strong rebound in the second half of the year. The credit profile of India is increasingly constrained by obstacles to economic growth, a high debt burden and a weak financial system. Policy-making institutions have been struggling to tackle and contain these risks, exacerbated by the pandemic,” Moody’s said.

The rating agency has, however, raised its forecast for real GDP in FY 2023 to 7.9% as against 6.2% earlier. On the other hand, Moody’s sees no imminent change in India’s sovereign rating – it has assigned India a Baa3 rating with a negative outlook.  “A rating upgrade is unlikely in the near future. However, we would change the outlook on India’s rating to stable, if economic developments and policy actions were to raise confidence that real and nominal growth will rise to sustainably higher rates than we project,” it said.

CRISIL slashes India’s growth forecast for FY 2022 to 8.2%

In its previous forecast for the fiscal, the agency had predicted double-digit growth for India, at 11%

May 11, 2021: Rating agency CRISIL, on May 10, 2021, said that India’s GDP growth rate could drop to around 8.2% in FY 2022, if the second wave of the COVID-19 pandemic reaches a peak number of cases by June-end. In case the second wave peaks in May-end, the GDP expansion will come at 9.8%, it said. In its previous forecast for the fiscal, the agency had predicted double-digit growth rate for India, at 11%.

As against its earlier projection of 15%, the rating agency also expects India Inc’s revenue growth to fall to around 10%-12%, in case the second wave of COVID-19 reaches a peak by June-end. “Rising costs could pose headwinds to companies, as they recover in specific sectors,” it said.

While stating that the impact of localised lockdowns on the overall economy would be much less severe than the national lockdown announced in 2020 to tame the COVID-19 first wave, CRISIL said that the restrictions on people’s movement and economic activity were seen increasing amid a dramatic spike in numbers, especially in rural India.

Terming the COVID-19 second wave and the vaccination drive as the two ‘gigantic challenges’ India was confronted with, CRISIL said India ranked lowest among fully vaccinated populations.The rating agency also said India could learn from the examples of other economies, where the second and the third waves of virus spread had not been able to make a dent in economic activity. “Many advanced economies that saw a resurgence in late 2020/early 2021, clamped down with renewed restrictions, some more stringent than the first time around (Germany and the UK, for example),” it said.

CRISIL also predicted that the second wave would have a less severe blow on employment, as compared to the first wave that resulted in millions of people losing their jobs. According to the rating agency, only 10% of the workforce was most vulnerable to the virus spread, because of the reliance on contact-based services.

Credit Suisse cuts India’s growth forecast for FY 2022 to 8.5%-9%

Credit Suisse’s GDP projection for India at 8.5%-9% for FY 2022, is much lower than those made by other rating agencies and brokerage firms

May 7, 2021: Credit Suisse has joined the list of rating agencies and think-tanks that have recently lowered India’s growth projection, following the COVID-19 second wave in India, which has prompted states to initiate partial lockdowns. Citing economic disruptions caused by these fragmented lockdowns, the Swiss brokerage firm has lowered the growth projection for India to 8.5%-9% for FY 2022, against its earlier projection of between 9.5% and 10%.

The projection by Credit Suisse is much lower than those made by other rating agencies and brokerage firms. Even though several agencies, including S&P, Moody’s, Fitch, Nomura and Barclays, have also cut their growth projections for India in the wake of a dramatic rise in the number of Coronavirus cases, most of these agencies have forecast GDP growth in India for FY 2022 between 10% and 11%.

On May 6, 2021, rating agency Fitch also lowered India’s growth forecast for FY 2022 to 9.5%, saying the containment measures launched by the states will weigh on India’s ongoing economic recovery, even though the actual impact of the fragmented lockdowns is likely to be much less severe, as compared to April-June 2020.

The lowering in growth projection by the Swiss firm also comes at a time when the government at the centre has warned that India, which is already the epicentre of the world’s worst Coronavirus outbreak, will witness a third wave of COVID-19 infections. On May 6, 2021, the Supreme Court also said the country needed to be prepared for the third wave of the contagion, which experts say could be more harmful, especially for children. On May 6, 2021, India recorded over 4,12,000 fresh COVID-19 cases for the second consecutive day, taking its overall caseload to 2,14,91,598.

Even though the impact of the localised lockdowns on the economy would not be as adverse as seen during the first wave in 2020, analysts at Credit Suisse are of the opinion that India may not reach the pre-pandemic levels of growth for at least two-three years after 2022-23.

Goldman Sachs lowers India’s growth forecast to 11.1% for FY 2022

Brokerage firm Goldman Sachs has lowered its growth projection for India for FY 2022 to 11.1% from the previous projection of 11.7%, following the COVID-19 second wave

May 5, 2021: Wall Street brokerage firm Goldman Sachs has lowered its growth projection for India for FY 2022 (the period from April 2021 till March 2022), as a tremendous rise in Coronavirus infections and the fragmented lockdowns it has introduced in India, are expected to take a heavy toll on the economy. The brokerage firm expects the Indian economy to grow at 11.1% in the current fiscal, as against its previous projection of 11.7%.

“The intensity of the lockdown remains lower than last year. Still, the impact of tighter containment policy is clearly visible in the high-frequency mobility data across key India cities. Overall, most indicators still suggest that the impact has been less severe than it was in Q2 (April-June) last year,” Goldman Sachs said in a report.

“While activity is likely to rebound quite sharply from Q3 (July-September) onwards, assuming restrictions can ease somewhat over that timeframe, the net result is to lower our FY22 real GDP growth forecast to 11.1% (from 11.7%  previously) and our 2021 calendar year growth forecast to 9.7% (from 10.5%),” it added.

Among the rating agencies that have also recently cut growth projections for India for FY 2022 include Nomura (to 12.6% from the previous 13.5%), JP Morgan (11% from 13%) and UBS (10% from 11.5%).

The IMF on the other hand expects Indian growth at 12.5% while the World Bank forecasts 10.1% growth. Back home, the RBI expects the India economy to grow at 10.5% in FY 2022. However, all these projections were made before the second wave of the Coronavirus pandemic started forcing states to announce fragmented lockdowns that are resulting in lakhs of people losing their livelihoods.

Barclays cuts India’s growth estimate to 10% for FY 2022

Barclays has cut India’s GDP forecast to 10% for FY 2022, citing slow pace of COVID-19 vaccinations and uncertainty over the number of cases

May 4, 2021: With the second wave of the Coronavirus pandemic dramatically impacting lives and livelihoods in Asia’s third-largest economy, global brokerage giant Barclays has lowered India’s FY 2022 GDP (gross domestic product) forecast to 10% from the earlier 11%.

“As India’s second COVID-19 wave continues, there is growing uncertainty around the number of cases and fatalities. The slowing pace of vaccinations are also hurting India’s recovery prospects. We lower our FY 2021-22 GDP growth forecast by 1%, to 10%, to reflect this uncertainty,” it said.

Even though India’s apex bank, the RBI, continues to maintain that the economy will grow at 10.5% this fiscal, analysts at Barclays are of the opinion that localised lockdowns, induced by the second wave, would make an adverse impact on growth. They, in fact, expect growth to fall to 8.8% if the current situation is not brought under control immediately and if localised restrictions on movement continue to remain in place till August 2021.

Stating that India is in the ‘unwelcome position’ of being the centre of the global pandemic, recording daily infections of over three lakhs of late, Barclays pointed out that the geographical coverage of the infections was widening, with positivity rates surging in many states.

“At the same time, India’s vaccination programme has slowed, weighed down by rising supply constraints and logistical challenges,” it said, adding that the move to liberalise vaccinations is unlikely to have any impact in the short term.

While estimating economic losses of USD 38.4 billion, because of the ongoing upheaval, the rating agency said that the overall financial toll could be hard this time too, even though the economic expense of the second wave is currently lower, as compared to the first wave, when India imposed one of the longest lockdowns to contain the virus’ spread.

Fitch Ratings upgrades India’s growth forecast to 12.8% for FY 2022

The rating agency has, however, added that it expected the level of growth to remain well below the pre-pandemic forecast trajectory

March 25, 2021: With signs of recovery becoming visible, Fitch Ratings has revised India’s growth estimate to 12.8% for fiscal 2021-22 from its previous estimate of 11%. The rating agency has attributed this upward revision to ‘a stronger carryover effect, a looser fiscal stance and better virus containment in the aftermath of the pandemic-induced slowdown’.

“India’s recovery from the depths of the lockdown-induced recession in Q2 2020 (calendar year, i.e., April to June 2020), has been swifter than we expected. The rapid pace of expansion at the end of 2020 was powered by falling virus cases and the gradual rollback of restrictions across states,” the rating agency said in its Global Economic Outlook.

It also added that the recent spike in new virus cases in some states, prompted it to expect milder growth in Q2 2021 (April to June 2021). “We expect GDP growth to ease to 5.8% in FY 2023, a downward revision of -0.5 percentage points, since December. The forecast level of GDP remains substantially below our pre-pandemic trajectory,” it said.

Last week, Moody’s Analytics also projected India’s gross domestic product (GDP) to witness 12% growth in 2021, as against its November 2020 estimate in which it had said India’s GDP will grow at 9% in the calendar year. “India’s near-term prospects have turned more favourable, following a stronger-than-expected December quarter, when GDP grew by 0.4% over the year, following a 7.5% contraction in the September quarter. Domestic and external demand has been on the mend, since the easing of restrictions, which has led to improved manufacturing output in recent months,” Moody’s Analytics said.

Moody’s Analytics also emphasised the point that the Coronavirus inoculation programme remains crucial for recovery of growth for the world’s second most-populous economy. “Total vaccinations crossed the 35-million mark on March 16, 2021. However, the various logistical constraints and the sheer scale of implementation, could negatively impact the pace of inoculations in the months ahead and eventually the timing of achieving herd immunity. Our March baseline forecast assumes that herd immunity is unlikely to be reached before the end of 2022,” Moody’s Analytics said.

Earlier this month, the Organisation for Economic Co-operation and Development (OECD) said it expected the Indian economy to grow at 12.6% in FY 2022 while Moody’s Investors Service, a sister concern of Moody’s Analytics that makes forecasts independently, as well, projected it to grow at 13.7% in the same period.

Even though rating agencies are forecasting better growth, the official stance on growth indicated towards a contraction of 8% in FY21, the worst performance by Asia’s third-largest economy, in over four decades.


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