Impact of Covid-19 Second Wave: Barclays Reduces India’s Growth Rate Estimate
The UK brokerage firm Barclays has cut India's growth forecast to 0.82% in FY 2022. Barclays said in its new estimate that India's growth rate could be 9.2% due to the economic impact of the second wave of covid. Barclays Chief India Economist Rahul Bajoria says that the growth rate has been reduced due to the slow pace of vaccination and lockdown in many states.
RBI forecasts 10.5% growth
Most analysts had released similar estimates last month. Even the Reserve Bank of India (RBI) had projected a growth of 10.5% in real GDP. Analysts had estimated growth rates to be slightly above 8.5% to slightly above 10%. Analysts had predicted higher growth in 2022, based on a low base for FY 2021. The Indian economy has been down by 7.5% in the last financial year.
Lockdown has a huge economic impact
Rahul Bajoria says that although cases of Covid infection have started to decrease in India now. But the lockdown imposed to prevent this has had a worse effect on the economy. That is why we have reduced the FY2021-22 growth forecast from 0.82% to 9.2%. He said that now the situation has come under complete control. Even in the parts of the country where the situation was much worse, improvement is being done. Due to this, the economy may open slowly.
More cases came out in the second wave
The Barclays report says that more cases have been reported in the second wave of Covid. In the second wave, the number of cases of Covid in India had crossed 4 lakhs per day and the number of deaths exceeded 4500 per day. Although the number of new cases is decreasing now, the number of deaths is still high. Barclays says the sudden spurt in Covid's cases has also had an impact on economic activity in May.
Estimates of the loss of $ 74 billion during April to June
"We expect a lockdown-like ban to end by the end of June 2021," the Barclays note said. Based on our new base case, we estimate that the Indian economy will incur a loss of about $ 74 billion to Rs 5.38 lakh crore during the second quarter of 2021 (April-June).
Slow vaccination also has an effect: Barclays
Barclays says that the pace of vaccination programs in India is also very slow. The main reason for this is the continuous supply shortage and logistics challenges. The brokerage firm says conditions will improve in the September quarter itself. Slow vaccination will affect growth in the medium term, especially when there will be a third wave in the country.
If the third wave comes, the growth rate will decrease
Barclays has presented a disappointing scenario when the third wave arrives. Barclays says that if the third wave of Covid arrives in India, it will need an 8-week lockdown to stop it. This will increase economic costs and reduce GDP growth to 7.7%.
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