Global ratings agency S&P sees the Indian economy to be on the road to recovery in the next financial year beginning April 1, as a consistently good performance of the farm sector, a flattening Covid-19 infection curve, and a pickup in government spending are all supporting the economic revival.
S&P latest report titled ‘Cross-sector outlook: India’s escape from Covid,’states that India needs many things to be right for its recovery to continue and it needs to quickly and thoroughly vaccinate most of its 1.4 billion people.
“The emergence of yet more contagious Covid-19 variants with the potential to evade vaccine-derived immunity present a major risk to this recovery. As does the possibility of early withdrawal of global fiscal stimulus,” the S&P report states.
It said the budget for fiscal 2021-22, will also support the recovery, with higher than expected expenditures. India’s improving growth prospects are critical to its ability to sustain the higher deficits associated with its more aggressive fiscal stance. The economy still faces important risks as it transitions from stabilisation to recovery. We estimate that India faces a permanent loss of output versus its pre-pandemic path, suggesting a long-term production deficit equivalent to about 10 per cent of GDP, S&P said.
The US-based rating agency said a sustained earnings rebound is key for ratings to stabilise as roughly one quarter of ratings are still on negative outlook.
