India’s gross domestic product (GDP) grew 1.6 per cent in the fourth quarter of 2021; but even though annual economic growth rate picked up in January-March compared with the previous three months, economists are increasingly pessimistic about this quarter after a huge second wave of COVID-19 infections hit the country last month.
India also clocked a negative growth rate of 7.3 per cent for 2020-21. But it was still better than what Reserve Bank of India and the Ministry of Statistics and Programme Implementation had forecast earlier.
A slow vaccination drive and local restrictions after a massive second wave of infections and deaths across the country have hit economic activities like retail, transport and construction while putting millions out of work.
Economists said the country faces a slowdown in consumer demand as household incomes and jobs have declined, with limited scope for the government to offer growth stimulus due to its rising debt.
Sakshi Gupta, senior economist at HDFC bank, said while the year-on-year numbers for the April-June quarter might look upbeat due to a low base, the sequential growth is likely to contract.
"With the spread of the virus more acute in rural areas in this wave, rural demand and sectors dependent on the rural economy might come under stress."
The central bank, which has kept monetary policy loose while boosting liquidity to the economy, said last week the country's growth prospects will depend on how fast India can arrest infections.
Analysts warn that the slow rollout could pose medium-term risks to growth, especially if the country were to experience a third wave of COVID-19.
Unemployment soared to a near one-year high of 14.7 per cent in the week ending May 23, according to the Centre for Monitoring Indian Economy, a Mumbai-based private think tank.
Krishnamurthy Subramanian, chief economic adviser at the finance ministry, said that some growth momentum had been lost after a surge in virus cases.
"India continues to need monetary and fiscal policy support," he said after the release of data