NEW DELHI - Until the second wave of coronavirus infections, the International Monetary Fund had predicted that India's gross domestic product (GDP) would grow 12.5 per cent in the current financial year, faster than China's, which the fund said would hit 8.6 per cent the same year.
But a surge in cases is now likely to delay economic recovery in the country. While a national lockdown is not anticipated, growth is expected to be pushed back a quarter or two.
"At the beginning of the year, the thinking was that the June and September quarters will be good due to the pent-up services demand as the virus was receding, and that we will see double-digit growth only because of a very, very low base last year," said Ms Pranjul Bhandari, chief India economist at HSBC.
India's service sector accounts for 53.66 per cent of GDP, while manufacturing is 14 per cent.
Ms Bhandari said: "Once the wave is gone, vaccination is widespread and the statistical base has stabilised, which we are hoping will happen in 2022, real growth will be reflected."
To push growth, the government had doubled its spending on healthcare and raised capital expenditure on infrastructure by 34.5 per cent, to 5.54 trillion rupees (S$99 billion), for this fiscal year. Agriculture, which grew 3.4 per cent last year, was expected to give the economy a boost.
The current wave has seen localised and less stringent lockdowns, leading economists to predict that the impact on economic activity would not be as crippling as the 23.9 per cent contraction in the April to June quarter last year.
Growth had already hit a six-year low of 4.7 per cent in the final quarter of 2019.
"If there is no demand in the economy, you can't possibly expect the industry to come out and invest," Professor Biswajit Ghosh of Jawaharlal Nehru University pointed out.
But Bharatiya Janata Party MP Bhupender Yadav has maintained that with the government measures, India will become a US$5 trillion (S$6.7 trillion) economy in the next five years.