Citi has lowered India’s GDP estimates for FY22 by 50 basis points, and its Chief Economist Samiran Chakraborty warned there was a risk of another 50 basis point hit.

“We have dropped down our GDP growth forecast by 50 basis points from 12.5 percent to 12 percent. We have also highlighted another 50 basis points downside risk if this (COVID 2nd wave) persists a little while longer beyond the first quarter impact. At this moment we are only looking at the impact to be contained in the first quarter, but if it spreads to the second quarter, we might need sharper GDP downgrades,” he said in an interview to CNBC-TV18.

Citi in its report has also indicated a sharp weakening of economic activity. Restrictions and fear factor among consumers are the main reasons for the drop in activity, Chakraborty said.

“The high-frequency indicators that we track, they have started declining a bit from mid-April. We are now back to where we were sometime around October of last year. This slowing down is partly because of the diverse restrictions being imposed by different states on different kind of activities, but also because of the fear factor that the consumers might be facing now in imposing voluntary restraints on their own consumption, own activities because of the ferocity of the second wave,” he said.

However, according to Chakraborty, the good news is that the stimulus from last year has not been withdrawn and industry is also better prepared in terms of supply chains.

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(Edited by : Santosh Nair)