India: Covid ‘threat to business recovery’

India: Covid ‘threat to business recovery’

The catastrophic second wave of Covid-19 engulfing India poses serious risk to the nation’s economy, according to S&P Global Ratings.

The credit rating agency also said business in India was at risk of severe disruption because of the pandemic.

S&P added that it may revisit its 11% growth projection for this year. In a statement it said: “A drawn-out Covid-19 outbreak will impede India’s economic recovery. This may prompt us to revise our base-case assumption of 11% growth over fiscal 2021/2022, particularly if the government is forced to reimpose broad containment measures.

“The country already faces a permanent loss of output versus its pre-pandemic path, suggesting a long-term production deficit equivalent to about 10% of GDP.”

Stressing that the pace and scale of the post-crisis recovery would have important implications for India’s credit rating, S&P said that strong economic growth would be critical to sustain the government’s aggressive fiscal stance and stabilise its high debt stock relative to GDP.