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Rising Covid Cases Re-Ignite uncertainty: ICRA

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One year post the nation-wide lockdown, Indian GDP had reverted to pre-Covid levels in Q3 FY2021, and the pace of growth is expected to rise modestly in Q4 FY2021, ICRA has stated in its latest report.

 

"Simultaneously, uncertainty related to the near-term outlook has risen considerably, following the spate of new Covid-19 infections, which have necessitated localised restrictions. After the uneven performance recorded by various lead indicators in January-February 2021, a favourable base effect will optically sharply boost the volume performance of most sectors in March 2021.

At the same time, the global trend of rising commodity prices is likely to constrain the improvement in profitability brought on by resurgent volumes. While the rollout of the Covid-19 vaccines has improved sentiment, access still remains restricted to a portion of the adult population, limiting the gains for the contact-intensive sectors," the report states.

Rising Covid Cases Re-Ignite uncertainty: ICRA

According to ICRA, despite a robust rabi harvest of several crops, an unfavourable base effect would dampen the real GVA growth of agriculture, forestry and fishing to 3.0% in Q4 FY2021 from 3.9% in Q3 FY2021.

"Overall, we expect the growth in the gross value added (GVA) excluding public administration, defence and other services (PADOS; at constant 2011-12 prices) to rise modestly to 2.7% in Q4 FY20," the report states.

 

Sounding a warning on rising Covid 19 cases, the rating agency has noted that recent weeks Covid-19 infection counts have started rising in many Indian states, such as Maharashtra, Kerala, Karnataka, Punjab etc., which has spurred fresh localised restrictions. If this trend proliferates, it would temper the extent of the base effect-led recovery that is anticipated in the immediate term, and may reignite supply-side disruptions.

"Even after the latest modification that will take effect from April 1, 2021, the access to Covid-19 vaccines will remain restricted to those above the age of 45, bypassing younger adults who make up a large part of the workforce and drive aggregate demand. In our view, uncertainty regarding the economic outlook will persist over the next few months, until the vaccines become available in India for all adults," the rating agency has stated.

Read more about: covid 19 icra
Story first published: Friday, March 26, 2021, 9:59 [IST]
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