January 22, 2022

The World Stock Markets Tips & Targets, News, Views & Updates

The World Stock Markets Tips & Targets, News, Views & Updates

Citigroup revises India GDP forecast down by 80 bps to 9% for FY22

Sluggish growth momentum in the December quarter and emerging risk from the Omicron virus may shave off 80 basis points from India’s real growth, said in its latest estimate, projecting 9 per cent growth for FY22.

“While the economic impact of the Omicron wave in 4QFY22 could be lower than previous waves, the activity momentum in 3QFY22 was much lower than our expectation. This has led us to revise downwards our FY22E real forecast by 80bps to 9.0%YY, largely due to weaker 3Q activity. Consequently, we have also revised FY23E real forecast to 8.3%YY (vs. 8.7% earlier),” India chief economist Samiran Chakraborty said in a research note on Monday.

The government’s statistics office on Friday projected 9.2 per cent for FY22, well below 9.5 per cent forecast by International Monetary Fund as well as the Reserve Bank of India, even as the size of the Indian economy is expected to surpass the pre-pandemic level after recovering from a historic contraction in the preceding year. Economists believe the official GDP data has overlooked the imminent impact of the third wave on growth momentum.

With rapidly escalating covid-19 caseload, many states have imposed night and weekend curfews to curb spread of the third wave, thus adversely impacting mobility and contact sensitive services. India Ratings last week estimated that in March quarter would now at 5.7 per cent, 40 basis points lower than the agency’s earlier estimate of 6.1 per cent. For the entire FY22, the rating agency expects to be 9.3 per cent, 10 basis points lower than its earlier estimate.

Chakraborty said although the third Covid wave has started in India, with daily cases crossing 1.50 lakh already, there are reasons to be hopeful of a less-disruptive Covid wave. “These include lower hospitalization rates (currently seen in cities like Mumbai and experience from South Africa), shorter Covid wave cycle period (~40 days trough-to-peak of daily cases in SA, compared to 90-100 days in previous waves), higher vaccination coverage (~70% second dose for adults in India), and weakening link between Covid and activity,” he added.

While Google mobility has started to decline, the impact of Omicron on overall activity could take couple of weeks to reflect in the data, Chakraborty said. “There are reasons to be hopeful of a relatively less-disruptive Covid wave in terms of overall activity. This, along with support from government spending, could cushion the fall in activity momentum in 4Q FY22E,” he added.

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