Barclays cut its full-year 2021-22 economic growth forecast for India by 80 basis points to 9.2%. The toll from stringent lockdowns imposed to curb rising COVID-19 infections appeared to be bigger than its earlier expectation.
The devastating second wave of coronavirus infections has forced nearly two-thirds of the country to introduce tough curbs. This slows the economic activity and prompting a host of major banks and ratings agencies to cut their economic forecasts. Barclays said in a note that although India’s second wave in Covid has started to recede, the related economic costs have been larger. This owes to the more stringent lockdowns implemented to contain the outbreak.
The brokerage cut its baseline full-year 2021-22 gross domestic product growth forecast. This lowers it to 9.2% year-on-year from 10% earlier and 11% before the outbreak of the second wave. Barclays warned that India’s slow vaccination drive might pose medium risks to economic growth. This is especially if the country experienced a third wave of this pandemic. GDP growth would be lowered by another 150 basis points in such case. This may drag the year’s growth to 7.7%.
The Reserve Bank of India (RBI) governor said at its last policy meeting that he did not expect any significant change to the RBI’s economic forecasts made in April. This is when it projected 2021/22 GDP would grow by 10.5%.