An Indian factory worker in a file photo. Image: Twitter

With India in the grip of a second Covid-19 wave and threatening to undo the fragile economic recovery from last year’s lockdowns, leading brokerages have downgraded the country’s gross domestic product projections for the fiscal year ending March 2022.

JP Morgan now expects the gross domestic product to grow 11%, down from its previous projection of 13%. UBS has lowered its forecast to 10%, down from 11.5%. Nomura now sees growth of 12.6%, down from its 13.5% earlier projection.

For the fiscal year ending March 2021, the economy is projected to have contracted up to 8%. In the backdrop of this low base, the economy is expected to grow in double digits for the current fiscal year.

India’s growth rate had been on the decline even before the past year’s pandemic. The annual growth was 8.3% in FY’17 and in the succeeding two years it had dipped to 6.8% and 6.5% respectively, while in 2019-20 it was down to 4%.

Earlier the Reserve Bank of India had projected the gross domestic product to grow 10.5% in the current fiscal year, while the World Bank foresees growth of 10.1%.

Meanwhile, the second wave of Covid-19 has been taking a heavy toll across the country in the past fortnight. With the caseload of new infections breaking all previous records, the latest official numbers put the daily number of infections over 261,000. This is more than twice last year’s peak of 97,000.

The country’s major economic hubs in Mumbai, New Delhi, Bangalore and Chennai are facing rapid rises in new infections, thereby raising fears of curbs on the movement of people and lockdowns. Mumbai has already imposed night curfews and Delhi has clamped down with weekend curfews to contain the spread of the virus.

The health infrastructure of the country is overwhelmed and for patients it is a long wait for tests and treatment. Health experts claim the presence of new strains of coronavirus which are much more virulent and contagious. Cremation and burial grounds in various cities are facing an unprecedented rush as the death toll continues to rise steadily. More than 177,000 people have lost their lives to the virus since March 2020.

Industrial production

The industrial output is already showing signs of strain. The Index of Industrial Production contracted 3.6% in February. It had contracted 0.9% in January after rising by 1.6% in December. The index growth has been negative in eight out of the first 11 months of the 2020-21 financial year. It has now shrunk 11.3% in the April-February period of FY21, as compared with the same period of the previous year.