|  NEWS

India Ratings has slashed its FY22 GDP growth estimate for India to 9.4% from 9.6%, as although recovery has been strong since the second coronavirus wave, the goal of vaccinating the entire adult population by the end of the year will unlikely be reached.

"Going by the pace of vaccination, it is now almost certain that India will not be able to vaccinate its entire adult population by December 31, 2021," according to Principal Economist Sunil Kumar Sinha.

Within its prior forecast in June, India Ratings stated the recovery would depend on the progress of the vaccine rollout: "If India is able to vaccinate its entire adult population by 31 December 2021, then the GDP growth is expected to come in at 9.6% in 2021-22, otherwise it may slip to 9.1%," it said.

The ratings agency’s forecast indicates that 5.2 million vaccinations would have to be administered daily to reach 88% of the adult population by the end of the year.

"Accordingly, we have revised our GDP growth for FY22 to 9.4% because with the ebbing of the second wave, several high-frequency indicators are showing a faster rebound than expected, kharif sowing is indicating a significant pick-up with the revival of southwest monsoon and exports volume and growth showed a surprise turnaround," Sinha added.

Moreover, India Ratings added Private Final Consumption Expenditure (PFCE) growth was positive in Q1 and the momentum was forecast to continue.

"But the second wave hit the country in April and May 2021 with such speed and scale that once again there has been a push back. India Ratings thus expects PFCE growth to come in at 10.4% in FY22 compared with 10.8% projected earlier," the report added.

Sinha also said India’s economy had started to see a slowdown in consumption before the pandemic. The subsequent lockdown in FY21 then further impacted jobs, and household budgets.

"Unlike the first wave, which was largely an urban phenomenon, the second wave spread to rural areas as well. Even if the agricultural output/income remains intact in view of the progress of monsoon so far, rural households are unlikely to loosen their purse strings in view of a likely rise in health expenditure as also the uncertainty/insecurity associated with the likely future waves of COVID-19," he said.

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