CRISIL, one of India's top ratings agency sees gross domestic product (GDP) contracting 7.7% compared with a contraction of 9% forecast in September.
"A faster-than-expected revival in activity in the second quarter, which continues into the festive season, is one of the reasons for the revision. Consistent decline in the overall Covid-19 case load is the other. Inadequate fiscal spending, however, remains a constraint, while the possibility of a second wave of afflictions, uncertainty regarding availability of vaccine, and hiccups in global economic revival due to resurgence of cases, call for caution. In fiscal 2022, GDP growth is expected to spurt to 10%, led by a very weak base and some global 'rising tide' effect. We estimate a permanent loss to the economy at 12% in real GDP terms," the ratings agency has said.
Early data for the third quarter suggests revival continued into the festive season, but, there are pockets where momentum softened. According to the ratings agency, fiscal policy support is not enough to revive demand and could expect more in the coming months.
According to Crisil, the monetary policy is trying to do the heavy lifting by overlooking inflation, which is above the Reserve Bank of India's comfort zone. The RBI has kept on hold cutting interest rates, in its last two policy meet.