The season for gross domestic product (GDP) downgrades appears to have begun. Nomura was the first to lower the FY22 India GDP forecast to 12.6 percent from 13.5 percent. Now JPMorgan has lowered their forecast to 11 percent from 13 percent and UBS has lowered to 10 percent from the 11.5 percent earlier. The reasons are obviously the COVID surge and resultant restrictions imposed by several state governments.

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Incremental daily cases, which had fallen from about one lakh a day in September 2020 to 10,000 a day in February, rose to 15,000 on March 1 then to 35000 on March 15, 60000 on March 25. April 1 it was 90,000, April 4 it was 1 lakh, April 10 it was 1.5 lakh and April 15 it was 2 lakh. GDP growth as of early end march was confidently expected to break from the 4 year old declining trend to post a robust 10.5-12.5 percent growth and settle into a near 7 percent thereafter.

But the surge in COVID cases has led to doubts over growth. Simultaneously other clouds are gathering. The rupee which was steady between 72.5 per dollar and 73.5 per dollar slided to 75.3 in just 5 trading sessions.

Foreign funds who were pouring into equity market in February and March turned sellers.

Are they worrying that the unrelenting surge in corona cases is likely to rock Indian macros. Also is there a worry that RBI's money printing will worsen India's inflation and push up yields. Headline inflation is anyway expected to remain over 5 percent while core inflation is sitting at 6 percent. Wholesale price index came in scarier.

Hitendra Dave, Head of Global Banking and Markets at HSBC India, Samiran Chakraborty, Chief Economist at Citi and Sonal Varma, Chief Economist at Nomura India shared their views.

“We need to watch how the infection cases pan out. The stringency of the lockdown is much lower and the focus is on testing and vaccination,” said Varma.

“We have seen last time around that pent-up demand always – to some extent – catches up and the second quarter growth would be better than what we were anticipating before,” Chakraborty mentioned.

For entire conversation, watch the video...

(Edited by : Abhishek Jha)

First Published:Apr 16, 2021 3:44 PM IST