economy: India to see quickest growth rebound in Asia in FY’22: UBS


Mumbai: With number of active COVID-10 cases falling sharply, India’s economy is expected to clock the fastest growth among Asian peers with higher than 11.5 per cent growth in FY’22, according to a report by UBS global research.

” The COVID situation in India has stabilized for now. We expect India’s real GDP growth to rebound to +11.5% y-o-y in FY’22 (consensus +9.2% year-on-year or y-o-y)” said Tanvee Gupta Jain, Economist, UBS Securities India in the report. ” While economic growth in FY’22 could be at a multi-decade high, this largely reflects the rebound from deeper contraction in FY’ 21 GDP (-7.5% y-o-y).

In its earlier research, UBS had estimated that the Indian economy would have lost close to Rs 20 trillion ($270bn), 10.6% of its GDP due to pandemic-related mobility restrictions. However, since then, economic activity has recovered more than expected (in the September and December 2020 quarters). The actual loss of output due to the pandemic could therefore be smaller at about Rs14trn.

The UBS-Financial Conditions Indicator (UBS India-FCI) suggests financial conditions have eased to levels better than those registered during the pre-COVID period (January/February 2020) and this is also helping support economic recovery.

The output gap- the difference between actual and potential output- will remain negative throughout- and actual economic activity will still be 8% below the level if growth in FY’22 had been closer to the trend or if there had been no pandemic, the report said adding that growth will moderate to 6% y-o-y in FY’23 as domestic and global financial conditions begin to normalise.

Four key to drive growth would be consumption, global growth, vaccine and reforms. UBS expects the bounce-back in India’s economic growth in FY22E will be largely led by continued improvement in consumption with both employment and income growth to recover further in FY’22, Stronger global growth, success in rolling out a COVID-19 vaccine, the focus on growth supportive reforms. ” Of these, the corporate tax rate cut, incentives for manufacturing, easier labour laws and encouraging FDI inflows bode well for India’s medium-term growth, in our view.” Gupta said in her report

But the biggest uncertainty in addition to the risk of rising global crude prices is the evolution of the pandemic, the implementation and effectiveness of vaccines and the impact on global growth. There is also a risk that India’s consumption does not recover as strongly as expected, possibly due to the risk of a new wave of infections and ensuing mobility restrictions and/or disruption to labour markets being deeper than earlier envisaged.





Source link

Leave a Reply

Your email address will not be published. Required fields are marked *