Girls wearing masks shop in Jaipur. Markets have been busy despite a spike in Covid-19 cases. Photo: AFP/The Times Of India/Bhagirath Basnet

Though India is witnessing an uptick in economic activity after the relaxation of the Covid-19 lockdown, S&P Global Ratings has kept its projections for the current fiscal unchanged, while some others have revised upwards their forecasts after the government released its Q2 numbers.

In its report on the Asia Pacific, the rating agency said it expects India’s growth to contract 9%, saying it will wait for more signs that the pandemic is on the wane. However, it conceded that there are now “upside risks to growth due to a faster recovery in population mobility and household spending.” S&P has projected the Indian economy to grow 10% in the next fiscal.

As per the official data, the Indian economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped the gross domestic product register a contraction of 7.5%, as against 23.9% in April-June period. But with contraction in two consecutive quarters, India entered into a “technical recession.”

The Reserve Bank of India had in October projected India’s economy to contract by 9.5% this fiscal. It said the industrial sector is leading the revival and the output is now above levels from a year ago, helped by rising demand for consumer goods. Investment recovered faster than consumption in the second quarter, partly due to the resumption of stalled projects. The private sector drove the recovery as spending resumed and households and firms moved more toward normalized activity.

S&P expects inflation to ease from recent highs in a gradual manner. However, it does not expect much fiscal easing in its projections. “Past action has targeted low-income households, with substantial welfare effects, but a broader fiscal effort has been lacking. We do not see this changing. At the same time, the RBI will be constrained from cutting rates and we anticipate rates will start normalizing upward from 2021 onward,” the rating agency added.

Meanwhile Japan’s Nomura Holdings has upgraded its forecast for the current fiscal end expects the Indian economy to contract -8.2% rather than its earlier projection of -10.8%.

Economists from agencies such as Axis Capital, ICICI Securities, Motilal Oswal and Care Ratings have also revised upwards their growth projections, which now range from 6% to 8%. Earlier some of them had even forecast that the Indian economy would undergo a double-digit contraction. Care Ratings had topped the list with -16.2%, but it has now revised it to -7.9%.