Barclays cuts India's FY22 GDP forecast to 10%; figures to get worse if curbs continue

Barclays Securities has lowered India's FY 2021-22 GDP growth forecast to 10 per cent year-on-year from 11 per cent earlier due to ravaging second wave of coronavirus. In a research report, India: Tracking COVID-19 and Vaccines, Barclays researcher Rahul Bajoria and Shreya Sodhani said the economic impact of the second Covid-19 pandemic could be "much higher".

It said if states continue to put in place curbs to contain the virus spread till August, it could mean 120 bp of downside on real GDp growth. "In a more pessimistic scenario whereby the pandemic is not brought under control soon, the economic losses could be much higher. If mobility restrictions remain in place until the end of August, this could point to another 120bp of downside to annual real GDP growth, dragging FY 2021-22 growth to 8.8% y/y."

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As per Barclays, as India's 2nd COVID-19 wave continues, there is a growing uncertainty around the number of cases and fatalities. "Slowing vaccinations are also hurting India's recovery prospects. We lower our FY 2021-22 GDP growth forecast by 100bp to 10 per cent to reflect this uncertainty," it said. It said India has become the centre of the global pandemic as cases are topping over 400,000 per day. India reported 3,68,147 new COVID-19 cases on Sunday and 3,417 deaths in the last 24 hours, the health ministry data suggests.

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"The geographical spread of new cases has also widened materially, with more states reporting rising positivity rates, and implementing more stringent mobility restrictions and lockdowns to control infections. Still, national level restrictions like those in early 2020 have not been deployed so far," it said.

Though India has launched a mega-vaccination programme, which aims to cover everyone above the age of 18, it is weighed down by rising supply constraints and logistical challenges. Due to this, many states have not been able to start their inoculation for those above the age of 18. "This move is unlikely to have a material short-term impact, but may result in faster vaccinations in coming quarters, especially in the cities," the researchers believe.

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Since India has avoided going for a nationwide lockdown so far, despite cases rising at an enormous pace, Barclays believes economic costs of the current surge in cases are much lower than during last year's national lockdown, but the bill is rising. "In our base case, we now estimate economic losses of $38.4bn, with restrictions likely in place until the end of June," it said.

Also read: CARE Ratings cuts India's GDP forecast to 10.2% for FY22

Also read: India FY22 GDP growth revised down to 10.4% from 11%: SBI Research report