GDP growth projections beat a majority of the estimates; experts claim the economy is on continuous mend and will likely be back to pre-pandemic levels before FY22 ends.
While the Reserve Bank of India kept policy rates and its accommodative stance unchanged, additional monetary measures have been brought in to fight the second wave of Covid-19.
International rating agencies, brokerages, and economists have slashed their projections on India’s economic growth. The RBI said the duration of the second wave is the biggest risk to the outlook.
In a matter of 41 trading days, since the last life-high on February 16, the second wave of the Covid-19 pandemic has caused between 8% -9.8% correction in the benchmark equity indices until April 19.
The recent surge in Covid-19 infections, the central bank says, adds uncertainty to the outlook on domestic growth as restrictions could dampen demand improvement and delay the return of normalcy.
Aided by strong demand recovery, credit ratio rebounds to 1.33 in H2FY21, from 0.54 in H1FY21. GDP could grow at 11% in FY22, but the resurgence in Covid-19 cases is a key downside risk, says CRISIL.
According to a BofA Securities report, the Covid-19 shock could delay India touching the GDP of Japan by three years. In their latest estimates, it will now happen by 2031 if the economy grows at 9%.
While Indian banks' improved financial metrics do not fully reflect the impact of the Covid-19 pandemic, the under–capitalised PSBs are likely to remain risk averse and lose market share.
