Buoyed by the decrease in coronavirus cases and uptick in high-frequency economic data, India's gross domestic product (GDP) is expected to return to expansion territory in October-December quarter, growing by 0.8 per cent year-on-year (YoY), multinational bank Barclays has said.
Hit by the COVID-19 pandemic and the nationwide lockdown imposed by the government in late March last year to control the spread of infections, India's GDP contracted by 23.9 per cent in April-June and 7.5 per cent in July-September quarter.
"We expect India's GDP to return to growth in Q3 FY2020-21 (October-December 2020), after contracting for two quarters. We forecast Q3 GDP will rise 0.8 per cent y/y, taking into account latest high-frequency data, posing mild upside risks to our FY2020-21 GDP forecast of -6.5 per cent. We maintain our FY2021-22 GDP at 8.5 per cent y/y and see some upside risks," Barclays Chief India Economist Rahul Bajoria said.
The Reserve Bank of India has forecasted a 10.5 per cent GDP growth in FY22.
Saying that India's vaccination rollout against COVID-19 has been slower than its estimates because of lower-than-expected turnout, Barclays said the government appears set to launch its second phase of vaccinations for the elderly and people with co-morbidities in March, which should see absolute vaccine distribution improve.
"From a supply standpoint, there are no signs of a shortage, and the government appears comfortable using AstraZeneca's vaccine despite recent reports of its lower efficacy against some strains," it said.
Barclays, however, warned against the sporadic increase in coronavirus cases in some cities, and termed the slow start of vaccination programme a 'key risk'.
"India's active COVID-19 cases have continued to decline, and two states, Kerala and Maharashtra have almost 75 per cent of total active cases. Still, sporadic increases in cases continue, especially with public transport opening up in key cities, which makes India's slow start to vaccinations a key risk to watch," it said.
India began its vaccination programme against COVID-19 on January 16. As per the Ministry of Health and Family Welfare, over 94 lakh vaccine doses have been administered to healthcare and frontline workers as of Thursday morning. Of these, about 3.7 lakh second doses have been given to healthcare workers.
The Indian government plans to begin vaccinating people above 50 years of age and those with co-morbidities from March. It has set a target of vaccinating 30 crore people by August against the coronavirus.