Peak coronavirus cases pose risk to economic recovery, and the GDP It is unlikely to hit the 3% growth previously forecast for the March 2020-2021 quarter, the Wall Street Bank of America (BofA) Securities brokerage firm said on Friday.
Noting that a one-month nationwide lockdown can reduce GDP by 100 to 200 basis points, the broker said growth was still weak, amplified by the sharp decline in key economic activity indicators and sluggish growth in the economy. ready, and soaring pandemic case only increases concerns on the growth front.
However, the report of BofA Securities did not offer a probable GDP figure for the March 2020-2021 quarter.
The seven-component BofA India activity indicator slowed to 1 percent in February from 1.3 percent in January, according to the report, as 4 of the 7 components of India’s activity index slowed in February compared to the previous month.
The report also pointed out that this poses risks to their actual 3 percent GVA growth forecast for the March quarter. The index first turned positive in 2020-21 in December 2020 after declining for nine consecutive months.
The outbreak of pandemic cases poses an increasing risk of recovery. “We estimate that a month of national foreclosure costs 100 to 200 bps of GDP,” the report warns.
The number of pandemic cases in India has skyrocketed, reaching new records for the past fortnight every day. The latest official figure puts daily infections at 2.17 lakh over the past 24 hours and 1,185 deaths – both the highest in the world and more than the combined figures for the second and third worst affected countries – Brazil and the United States. United States.
The report says it remains to be seen whether the second wave subsides without a national lockdown and notes that Maharashtra, which contributes more than 16% of the national GDP, is already under lockdown until the end of the month, l ‘State holding more than half of the national GDP. new cases.
The good news is that real lending rates are falling thanks to the steady easing of the RBI and the normalization of the core. WPI and these factors are expected to push 2021-2022 loan growth to 12%, down from 5.6% in the last fiscal year. Real interest rates are a proxy for pricing power.
Lower real lending rates will stimulate loan growth. Despite a slight increase in inflation, the nominal marginal cost of funds based on the lending rate (MCLR) is now down 145 basis points since March 2019 and the actual MCLR is 506 basis points lower since then. The same is true for nominal and real weighted average lending rates.
In summary, “sluggish loan growth only reinforces our view of a weak recovery,” the report concludes.