Why have there been a series of growth downgrades by brokers and rating agencies of India’s FY22 GDP growth?

The second wave of pandemic has posed a major downside risk to economic activities in the April-June quarter and the lag effect could remain for a couple of quarters easily. Two of the major global rating agencies; Fitch Ratings and S&P Global Ratings, cut GDP forecasts. While Fitch has cut the FY22 GDP growth projection to 9.5%, in the case of S&P, it has downgraded from 11% to 9.8%. However, the good news is that tax collections are higher.

Some of the high frequency indicators are not too encouraging. Credit growth continued to remain muted at 5.3%. IIP and manufacturing have shown negative trends and could worsen once the base effect of 2020 weakens. Core sector for March was up 6.8% but that is largely base effect. In terms of overall performance of the economy, agriculture has been the silver lining with record foodgrain production, so a lot will depend on normal monsoons this year.