Financial services provider Credit Suisse has slashed its nominal FY22 GDP growth prediction for India by 150-300 basis points (bps) to 13-14 per cent due to the impact of the second wave of the pandemic on the economy and consumer sentiment. The lockdowns have only slightly impacted tax revenues, so better recovery is expected in the second half of 2021.
The overall impact of the pandemic restrictions on the GDP growth is expected to be about 150 bps in base case scenario. If the state-wide restrictions are prolonged and the impact increased to 300 bps, the nominal GDP growth in FY22 will still be about 13-14 per cent, media reports said quoting equity analysts of Credit Suisse Premal Kamdar and Jitendra Gohil.
The pent-up demand is likely to boost recovery, which will be lower than the first wave. India will also see a rub-off effect of the global growth as developed countries could witness a quicker growth due to their vaccination programmes, the analysts added.
The localised lockdowns in various regions of India may hamper the movement of goods and supply chain bottlenecks could postpone the recovery of the industrial sector. However, pent-up demand will boost growth in the second half of 2021.
The analysts also said that the impact of tax collections will be limited due to better compliance and the positive impact of greater inflation on tax collections.