Mumbai: Fitch group company's India Ratings has slashed India's GDP growth forecast to 9.4 per cent in 2021-22 from its earlier estimate of 9.6 per cent, citing underperformance of various economic indices, including the slower pace of vaccination in the country.
India Ratings has seen stagnant wage growth, high health expenditure, and rising prices of consumer products amid a fall in household savings as impediments to GDP growth. The report also pointed out the slow pace of vaccination as a major blockage in economic growth. As per its estimation, if the country could vaccination its entire adult population by December 31 this year, the GDP may mark a growth of 9.6 per cent in FY22 or else it will slip to 9.1 per cent.
While the RBI projected a real GDP growth rate of 9.5 per cent in 2021-22, the most other predictions on the GDP growth are claiming a double-digit growth for the same period this fiscal for the extremely low base of a GDP contraction of 24.4 per cent in April-June last year.
While the report sees faster recovery from the second COVID wave, higher exports and sufficient rainfall as promising factors, the country's consumption side remains murkier in the medium-term perspective.
"Unlike COVID 1.0, which was largely an urban phenomenon, COVID 2.0 spread to rural areas as well. Even if the agricultural output/income remains intact in view of the progress of the monsoon so far, rural households are unlikely to loosen their purse strings in view of the COVID-19 induced rise and/or a likely rise in the health expenditure as also the uncertainty/insecurity associated with the likely future waves of COVID-19," India Rating report said.
The stagnation in the income growth remained a key element to put the consumption on the not encouraging side of the present economy. The demand has also been affected by the high consumer inflations amid a decline in household savings.
The jobs sector has been showing indications of the impact of the pandemic being more pronounced in the case of better quality jobs in urban areas, especially salaried jobs after the second wave of the pandemic.
The CMIE data showed that the quality job market in the urban areas has been severely impacted by the pandemic that jobs at 76.5 million in July 2021 were actually 3.2 million fewer than they were in June, notwithstanding the broader economic uptick in July.