In a blow to the Indian economy, global forecasting firm Oxford Economics on Monday revised downwards its India GDP growth forecast for 2021 from an ambitious 11.8% to 10.2%. The reason cited for the same was India’s escalating health crisis, with acute shortage of oxygen and critical drugs in the health care system. Coupled with the healthcare crisis, faltering vaccination rate and lack of a convincing government strategy to contain the pandemic also pose a threat to the recovery of the Indian economy.
Oxford Economics additionally stated that given India’s current status of healthcare crisis, the likelihood of further mobility restrictions can be expected. The rating agency further expects that India’s targeted lockdown approach, less stringent restrictions on public mobility and resilient consumer and business behavior can help mitigate the economic impact of the second wave.
It is to be noted that India’s economy, in the current scenario, is being severely affected by the second wave induced stringent lockdowns. India has witnessed a fall in its PMI index from 57.5 in February to 55.4 march. Additionally, in March India recorded a 10.7% rise in its urban unemployment.
The rating agency stated that “India’s escalating health burden, faltering vaccination rate, and lack of a convincing government strategy to contain the pandemic have prompted us to downgrade our 2021 GDP growth forecast to 10.2 percent from 11.8 percent previously,”.
Additionally, the global forecasting firm expects GDP to subsequently contract in the second quarter as well.
It added that “But if struggling health systems force more states to resort to stricter lockdowns like Maharashtra, we will likely lower our growth forecast further,”.
As India records high number of daily covid cases, India’s health care system has collapsed in the worst-hit states, with even the national capital Delhi facing acute shortage of oxygen and COVID-19 hospital beds. What aggravates the situation is Indian authorities’ complacency after successful mitigation of the first wave, authorities’ incompetence to tackle the ominous second wave and public’s callus attitude to not adhere to the covid appropriate behavior.
The rating agency noted that “While the official mortality rate has edged lower, it masks a rapidly rising death count. Deaths are now doubling every ten days (as opposed to an average of 29 days in the first wave) and even this figure is likely buttressed by delayed or under-reporting of deaths.”.
On the contrary, the IMF has projected an impressive 12.5 percent growth rate for India in 2021, while S&P Global Ratings has additionally stated that Indian economy will grow at 11 percent in the current fiscal.
Similarly, in RBI’s last policy review, it had projected a GDP growth rate of 10.5 percent for FY’22. According to India’s statistics office, the economy projected to contract 8 percent in 2020-21 while the Economic Survey 2020-21 sees 11 percent growth in 2021-22.