As a result of a decrease in COVID-19 cases and an uptick in high-frequency economic data, the country’s gross domestic product (GDP) is expected to return to expansion territory in the October-December quarter, growing by 0.8 per cent year-on-year (YoY), according to multinational bank Barclays. Hit by the COVID-19 pandemic and the nationwide lockdown imposed by the government in late March last year to control the spread of infection, the country’s GDP contracted by 23.9 per cent in April-June and 7.5 per cent in the July-September quarter. (Also Read: RBI Monetary Policy Highlights: Repo Rate Unchanged, GDP Growth Projected At 10.5% )
“We expect GDP to return to growth in Q3 FY2020-21 (October-December 2020), after contracting for two quarters. We forecast Q3 GDP will rise 0.8 per cent y/y, taking into account latest high-frequency data, posing mild upside risks to our FY2020-21 GDP forecast of -6.5 per cent. We maintain our FY2021-22 GDP at 8.5 per cent y/y and see some upside risks,” said Rahul Bajoria, Chief India Economist, Barclays.
In its Monetary Policy Review presented on February 5, the Reserve Bank of India projected a 10.5 per cent GDP growth in financial year 2021-22. However, Barclays warned against the sporadic increase in coronavirus cases in some cities across the country, and termed the slow start of vaccination programme a ‘key risk’.
The country’s active COVID-19 cases have continued to decline, and two states, Kerala and Maharashtra have almost 75 per cent of total active cases. Still, sporadic increases in cases continue, especially with public transport opening up in key cities, which makes the country’s slow start to vaccinations a key risk to watch, according to Barclays.