Citigroup, ICICI lower growth projections for India as Covid cases surge

Daily new cases of coronavirus in the country have gone up from about 6,500 two weeks ago to more than 170,000 now.

A sharp rise in coronavirus cases in India is seen hurting the economy’s growth prospects, albeit milder than during the previous waves.

 Economists, including those at Citigroup Inc., India Ratings & Research Pvt., and ICICI Bank Ltd., have lowered their gross domestic product estimates after official data Friday showed Asia’s third-largest economy will likely expand by 9.2% in the fiscal year to March -- a pace that’s slower than the 9.5% previously expected by the nation’s central bank, as well as the International Monetary Fund.

While the economic impact of the omicron outbreak in the current quarter could be lower than previous waves, activity in the last three months was weak, Citi economists Samiran Chakraborty and Baqar M Zaidi wrote in a research report Jan. 9. They lowered their forecast for the current fiscal by 80 basis points to 9%, and pegged next year’s expansion at 8.3%, from 8.7% earlier.

The daily new cases of coronavirus in the South Asian nation have gone up from about 6,500 two weeks ago to more than 170,000 now--the sharpest rise since the start of the pandemic about two years ago. The result has been a return of lockdowns in several parts of the country.

“There are reasons to be hopeful of a less-disruptive Covid wave,” Chakraborty and Zaidi wrote. “These include lower hospitalization rates, shorter Covid wave cycle period, higher vaccination coverage, and weakening link between Covid and activity.”

Others at the BofA Securities Inc. and Deutsche Bank AG have retained their projections for now, while flagging downside risks to India’s world-beating growth. 

“Some negative impact on activity is probable, but the rebound can also be relatively quick,” economists led by Aastha Gudwani at BofA wrote in a report Jan. 10. Downside risks are growing, but it’s too early to quantify, they said.

But there is a broad consensus that the impact of this wave will be mild. 

An impact is expected in the current quarter, Radhika Rao of DBS Bank Ltd. said in an interview to Bloomberg Television Monday. But “the impact of subsequent waves has been shallower,” she said.