India's economy likely accelerated in January-March, before Covid-19 second wave

India's economic growth likely picked up in the January-March quarter from the previous three months, but economists have grown more pessimistic about this quarter after a harsh second wave of Covid-19 hit the country last month.

The median forecast from a Reuters survey of 29 economists showed gross domestic product in Asia's third-largest economy grew 1.0% in the March quarter from a year earlier, up from 0.4% in the previous quarter when India began pulling out of a steep pandemic-induced recession in earlier six months.

But the second wave of infections and deaths across the world's second-hardest hit country has caused forecasters to trim their projections for the coming months.

The median forecast for April-June growth is 21.6%, down from a month-earlier estimate of 23% after the resurgence prompted most industrial states to impose lockdowns, throwing millions out of work. For the fiscal year to March 2022, economists cut their median forecast to 9.8% from 10.4%.

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India has recorded 2.7 crore Covid-19 infections, behind only the United States, and 3,25,972 deaths as of Sunday, although the rise has begun to slow.

Prime Minister Narendra Modi's administration says the economic impact will not be as severe as last year, as lockdowns are looser this time and growth in manufacturing and exports is higher.

But Arun Singh, global chief economist at Dun & Bradstreet, said the downside risks to growth were intensifying as the second wave makes the return to pre-pandemic growth rates difficult.

"Owing to the intensifying nature of the pandemic and the spread to the rural areas, which were largely spared in 2020, we expect growth prospects to have deteriorated for 2021/22."

The RBI, which has kept monetary policy loose while boosting liquidity to the economy, said on Thursday that growth prospects will depend on how fast India can arrest infections.

Modi has faced criticism for the slow pace of his four-month-old vaccination campaign, which has inoculated fewer than 4% of India's 138 crore people. Analysts warn the slow rollout could pose medium-term risks to growth, especially if the country were to experience a third wave of Covid-19.

The economy, which was facing a slowdown even before the pandemic, now confronts a crash of consumer demand - constituting over 55% of the economy - as household incomes and jobs have declined.

Unemployment soared to a near one-year high of 14.73% in the week ending May 23, according to the Centre for Monitoring Indian Economy, a Mumbai-based private think tank.

Finance Minister Nirmala Sitharaman, who said on Friday that no decision has been taken for another stimulus package, has limited space due to a fall in tax collections and rising public debt.