India's FY22 growth forecast of 11% firmly tilted to downside: Crisil

The Indian economy’s growth is “firmly tilted” to a downside in the range of 9.8-8.2% in the ongoing financial year from the current estimate of 11% on account of the second wave of Covid-19, according to rating company Crisil.

While weaker growth is expected in the first half of FY22 as the resurgence in infection softens the favourable base effect, the second half would be supported by better vaccination coverage and stronger global growth, the company said in a report on Monday.

In a moderate downside scenario, where daily cases would peak around May-end, India’s GDP may grow 9.8% in FY22, while in a severe scenario, with daily cases peaking by June-end, growth could be 8.2%, the report said.

The severe scenario implied an increased permanent loss to GDP of about 12% over the medium term as against 11% estimated in Crisil’s base case.

Both Covid-19 cases and deaths have been more spread out during the second wave compared to last year as the infection continued to increasingly affect rural areas.

The ensuing lockdowns and restrictions across states have led to a softening of the recovery momentum in leading economic indicators such as Google’s mobility index, power consumption and auto sales, data from the report showed.

However, sectors such as manufacturing have shown resilience as it remained exempt from lockdown restrictions this time around and was buoyed by strong external demand.

Exports have clawed their way back to pre-pandemic levels on support from a global recovery tide and would accelerate as advanced economies like the US are expected to see strong growth this year.

Contact-based services, with about 10% share in both the workforce and gross value added, were the most vulnerable to employment loss and a double-dip in recovery momentum, Crisil said.

India Inc’s revenue growth for FY22 was projected at 15% but Crisil noted that rising input costs could pose headwinds to recovery as it could seep into consumer inflation.

Crisil recommended deployment of fiscal measures to support the urban poor and services sector while increasing allocation to the rural employment guarantee scheme and ramping up rural health infrastructure.