India’s gross domestic product (GDP) growth may slip to 8.2 percent in the fiscal year 2021-22 if the second wave of the pandemic peaks in the country around June, Indian rating agency Crisil said in a report on Tuesday, May 11, but is maintaining its estimated GDP growth at 11 percent for now.
“Risk is "firmly tilted downwards" to its projection of 11 percent growth in fiscal 2021-22,” the Crisil report said, adding that, if the second wave of the pandemic peaks in May, India’s GDP growth rate will dip to 9.8 percent, but will slip to 8.2 percent if the pandemic peaks later around the end of June.
However, the rating agency said its 11 percent growth estimate will still hold if the surge in Covid-19 cases and lockdowns peak by mid-May, in which case the economy will return to pre-pandemic levels by the September quarter this year.
"The intensity of the second wave of Covid-19 infections in India has come as a surprise, and is haemorrhaging the country's healthcare infrastructure. That has made lockdowns and restrictions inevitable,” the Crisil report said.
About 10 percent of India's GDP and workforce is most vulnerable because of the surge in cases and, among the sectors, services in contact with the pandemic wave are the most vulnerable, while the rise in reverse migration could also impact construction activity, Crisil said.
Crisil said construction is a highly labour-intensive sector and will remain a key monitorable from an employment perspective, but it pointed out that the second wave could be less severe on employment.