The downside risks to growth still persist in view of a possible second wave of COVID-19 and an uncertainty over vaccine availability, even though the latest data points suggest that economic activity has gathered pace, says a report.
According to Dun & Bradstreet's latest Economy Forecast, a second wave of infections, which can't be ruled out, would lead to partial re-establishment of lockdowns, weaken the tentative signs of demand and dampen confidence level of global investors.
"Even though the latest data points show an increase in the pace of economic activity, the worst is not over. We believe that the resurgence of the virus in the ongoing festival season, alongside the uncertainty about vaccines and treatments means that downside risks remain significant," Dun & Bradstreet Global Chief Economist Arun Singh said.
Moreover, the need for additional stimulus packages from the government would add pressure to the already strained government finances, Singh said adding that "inflationary pressures, especially across non-food articles, pose concerns to the growth prospects".
According to Dun & Bradstreet (D&B), the Index of Industrial Production (IIP) is expected to grow modestly during October 2020, buoyed by the festival related demand, but growth might taper off from November 2020 as base effect comes into play.
"Post-festival slowdown in demand and rising cases in several states pose concerns to the pace of recovery in industrial production," it said.
Dun & Bradstreet expects the IIP to have grown by 0.2-0.5 per cent during October 2020.
Noting that the recent stimulus package by the government is expected to push the momentum of activity which has reared up during the festive period, Singh said "it remains to be seen how much the government spends and credit gets disbursed during the current fiscal year".