- India on Thursday reported 247,417 new infections in a 24-hour period, according to government data.
- The sharp rise in cases has prompted economists to be more cautious about the outlook for the January-March quarter, but they also expect a less severe impact than previously thought.
- City economists revised their growth projections for India Projected GDP for FY 2022 was revised upwards by 80 basis points to 9%.
India is experiencing a third wave of Covid infections – while its overall impact is expected to be less disruptive than previous waves, some economists are predicting slower growth in the near term.
The economic impact of the new wave may be relatively less severe in the first three months of 2022, City economists Samiran Chakraborty and Bakar M Zaidi wrote in a January 9 note.
But he pointed out that the pace of India’s economic activity between October and December had already been lower than expected before the third wave arrived.
This led City economists to revise their inflation-adjusted GDP estimates for India for fiscal year 2022. Growth is projected to fall from 9.8% year-on-year to 9% in October due to weak economic activity. -December quarter, said Chakraborty and Zaidi.
As a result, they lowered their fiscal 2023 growth projections from 8.7% year-over-year to 8.3%.
India’s fiscal year 2022 ends in March, and its fiscal year 2023 begins on 1 April and ends on 31 March the following year.
Covid cases in India are on the rise again, with the daily figure exceeding 150,000 in recent days.
government data revealed India on Thursday reported 247,417 new infections in a 24-hour period with the daily positivity rate – which measures the share of Covid-19 tests that are positive – at 13.11%.
According to statistics, there are more than 11 lakh active cases of infection in the country.
So far, India has identified 5,488 cases of covid infection, which were caused by the new, highly infectious Omicron variant, which was first detected by South African scientists. It is likely that the number of omicron cases in India is much higher than what has been officially reported so far as it takes time for genetic sequencing to determine whether a person with COVID has contracted the new strain.
The major tension in India is still delta.
While India’s health care infrastructure is relatively better prepared to deal with the third wave, the rapid rise in cases could potentially push it to the brink again.
Radhika Rao, a senior economist at Singapore’s DBS Group, said in a January 6 note, “Regional variations in access to healthcare workers, medical facilities, oxygen ventilators and critical care underscore the need for proactive action before moving beyond metros. “
The impact of the third wave could potentially worsen in the coming weeks and months. Thousands of pilgrims are expected to gather at the Ganges river in the eastern state of West Bengal this week for an annual festival. Local media reports stated,
Last year, a similar large-scale religious gathering was partly responsible for a devastating second wave of infections between February and May.
While the sharp rise in cases prompted economists to be more cautious about the outlook for the January-March quarter, they are also expecting a less severe impact than previously thought.
Priyanka Kishor, head of India and Southeast Asia economics at Oxford Economics, wrote, “We expect much less economic damage from the current outbreak than from the first two waves of infections as the economy has grown more resilient to Covid-related disruptions. adjusted for.” In the note dated 8 January.
Still, she said Oxford Economics cut its growth forecast for the January-March quarter by about 0.5 percentage points to 2.5% quarter-on-quarter to “reflect a third wave of Covid infections”.
The latest surge is expected to lead to another drop in India’s private consumption as states impose restrictions to limit the spread of the virus.
He added that the subsequent April-June quarter is set as the start of a more “sustainable recovery” when, by then, a large percentage of the population is expected to be fully vaccinated.
City economists said there are reasons to be optimistic for a less disruptive Covid wave. They include: low hospitalization rates – similar to what is currently seen in cities like Mumbai – a shorter COVID wave cycle, higher vaccination coverage and a weaker link between COVID and economic activity.
“Higher vaccination coverage will aid policy makers in avoiding tighter restrictions,” he wrote.
India has fully vaccinated About 70% of its adult population And this year launched a vaccination campaign for people between the ages of 15 and 18.
According to Kishor of Oxford Economics, it is unlikely that the Reserve Bank of India will consider raising interest rates before the second quarter as the central bank prioritizes growth risks over a near-term inflation spike.
Rising prices are a matter of concern as retail inflation in India India reaches 5-month high in December,
DBS Group’s Rao said the RBI last month signaled its preference for “a gradual road towards policy normalisation”, and a departure from global policy changes – particularly from the US Federal Reserve.
According to Rao, the disruption in supply could potentially keep inflation at the upper end of the RBI’s 2% to 6% target range in FY2023.
“Stable inflation and global rate adjustments prompt us to maintain our call to adjust the repo rate by a cumulative 50bps in 2H,” she said.