India’s GDP will likely hit pre-pandemic levels by the December quarter of its financial year, according to Acuite Ratings.

 

Although the majority of developed markets have surpassed or neared pre-coronavirus crisis GDP levels in the June quarter of FY22, a number of emerging economies, particularly India, are still lagging behind these levels, highlighting the deeper impact of the crisis.

 

Even though India’s GDP in the June quarter of FY22 was 20.1% year-on-year, it remains 9.2% lower than the June quarter of FY20 in real terms.

 

The manufacturing and export sector performed better during the second wave of the pandemic compared to during 2020’s lockdown, yet the impact on the services sector remains severe. According to an Acuite Ratings report: “New contracts continue to be impacted by uncertainty due to rise in virus caseload globally and stringent international travel restrictions. On the price front input costs rose to a 4-month high due to higher fuel, retail, and transport prices.”

 

Suman Chowdhury, chief analytical officer, Acuité Ratings & Research said in a statement: “With vaccination covering a critical mass, accommodative policy backdrop, approaching festive season and favourable global growth outlook, we expect India’s GDP to reach its pre-pandemic levels by Q3 FY22. As such, we continue to retain our FY22 growth forecast at 10% with downside risks emanating from possibility of a third wave of infections, though the loss of economic momentum is expected to be much less in comparison to the second wave.”

 

In addition, during the final week of May, domestic economic activity bottomed-out yet momentum continued to increase throughout August. High frequency indicators such as Google mobility, rail travel, auto sales and e-way bill collections are moving into rapid recovery mode, with the majority close to their respective highs before the second wave of the virus hit.

 

The Acuite Ratings report adds: “Overall, manufacturers and service providers are optimistic about the near-term outlook with removal of mobility restrictions and vaccination gathering momentum; however, they also remain cautious amid continuing concerns around third Covid wave.”