S&P cuts India’s GDP growth forecast to 9.8% for FY22

The US based rating Agency S and P recently cut the growth forecast of India to 9.8% for 2021-22. In March 2021, the agency expected 11% GDP growth in the country. According to the agency, the second wave might derail the recovery. According the S and P ratings, the fiscal position of the Government of India is already stretched.

Recent RBI measures towards Economic Recovery

  • RBI has provided the banks with the freedom to borrow Rs 50,000 crores at a repo rate of 4%. These loans are to be classified as COVID loans. The credit risks of these loans are to be borne by the banks.
  • The Small Finance Banks have been given an option of borrowing Rs 10,000 crores at repo rate. This is mainly done to help the informal sector that comprises of daily wage labours and vendors.
  • RBI introduced Resolution Framework 2.0 to help the small businesses and self-employed individuals. Under this framework, people who did not avail the benefit of restructuring earlier are now eligible.
  • Recently, the second rounds of G-SAP 1.0 were announced.

Impacts of Second Wave

The middle class of the country were already hit by lock-down induced job losses and salary cuts. The second wave is to deepen these losses.

Restaurant and hospitality businesses in major cities were hit badly. The travel and tourism are the largest employers in India. They contribute to 9% of the country’s GDP. The lockdown restriction and travel restrictions due to the second wave during the recovery phase might increase bankruptcy.

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