In sync with most rating agencies, CARE Ratings on Tuesday revised the outlook for the Indian economic growth to 9.2 per cent for year 2021-22 as against 10.2 per cent it had predicted in April.

The agency cited the impact of the second wave of the Covid-19 pandemic as the reason behind a slowdown in the economic growth. “Our earlier projection was based on the premise that the lockdowns would be rolled back in June and daily infection caseload would decline in May. However, while there have been some swings in the last few days, the daily cases have not gone below the 350,000 mark. The seven-day moving average is still at around 390,000 as of May 10,” CARE said in a report.

The agency sees a threat to the farm sector, which was largely unaffected during the first outbreak of the pandemic last year, this time because the infections are spreading to the interiors in most states. It has also affected workers in businesses with considerable disruption in supply chain. “There is a double whammy due to the second wave – of a lockdown as well as personal health of workers,” the report said.

CARE estimates that there will be a push back to the unlock process which can only be moderate in July and pick up in August if India can leave the worst behind by June 2021.

“Based on the progress of the vaccination programme, it does appear that there will be significant delays in meeting targets and the nation will still be in the first gear mode in June with movement to the second starting earliest in July. Hence, the first quarter will be stressed out to a large extent with July showing mixed signs,” the agency said.

India has 3.7 million active cases today, affecting over 10 million families. There have been a cumulative discharge of around 19 million people, which will affect at least 60-70 million families and, in turn, their purchasing power, according to calculations drawn up by the agency. The report expressed concern over the pent-up demand recovery like last year. “These people would have spent considerable amount of money on medical treatment and unless in the top echelons of income would not be able to spend more this time after the infection incidence abates.”

India’s GDP in 2020-21 was Rs 134.08 lakh crore and it was projected to reach Rs 148.83-Rs 149.10 lakh crore this year. The revised estimate showed that the GDP level in real terms will be Rs 146.42 lakh crore. The Union Budget for 2021-22 had targeted a nominal GDP of Rs 222.87 lakh crore and the fiscal deficit of Rs 15.07 lakh crore. With the real GDP growth falling by Rs 2.68 lakh crore, the nominal GDP would now come down to Rs 218.98 lakh crore with a loss of nearly Rs 3.9 lakh crore of income.

A 2 per cent slowdown in GDP will also drive the overall tax revenue down from Rs 15.45 lakh crore to Rs 15.11 lakh crore. This Rs 34,000 crore shortfall will be added to the Rs 25,000-crore additional cost to the Centre on account free food programme for 800 million people declared last month. “This will lead to an increase in deficit by Rs 59,000 crore. The revised fiscal deficit under ceteris paribus conditions would be Rs 15.66 lakh crore or 7.15% of GDP,” the report said.

It also pointed out that any adverse effect on agriculture due to the spread of the infection would call for higher spending on the national job scheme.