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India Ratings cuts FY22 GDP forecast to 9.4% from 9.6%

Going by the pace of vaccination, it is now almost certain that India will not be able to vaccinate its entire adult population by December 31, 2021, Principal Economist Sunil Kumar Sinha has said

August 19, 2021 / 01:19 PM IST

India Ratings on August 19 cut its FY22 gross domestic product growth estimate for India to 9.4 percent from 9.6 percent, saying while there has been a strong recovery after the second Covid-19 wave, the aim of vaccinating the entire adult population by year-end would not be met.

"Going by the pace of vaccination, it is now almost certain that India will not be able to vaccinate its entire adult population by December 31, 2021," Principal Economist Sunil Kumar Sinha said on August 19.

In its previous forecast in June, the ratings agency had said the recovery would depend on the progress of the vaccination drive. "If India is able to vaccinate its entire adult population by 31 December 2021, then the GDP growth is expected to come in at 9.6 percent in 2021-22, otherwise it may slip to 9.1 percent," it had said.

The agency’s estimate suggests that 5.2 million daily doses would have to be administered from August 18, 2021 to vaccinate more than 88 percent of the adult population by year-end as well as to administer single doses to the rest by March 31, 2021.

"Accordingly,  we have revised our GDP growth for FY22 to 9.4 percent because with the ebbing of the second wave, several high-frequency indicators are showing a faster rebound than expected, kharif sowing is indicating a significant pick-up with the revival of southwest monsoon and exports volume and growth showed a surprise turnaround," Sinha said.

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

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There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

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Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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India Ratings said that Private Final Consumption Expenditure (PFCE) growth, after a gap of three consecutive quarters, turned positive in January-March quarter and was expected to maintain the momentum.

"But the second wave hit the country in April and May 2021 with such speed and scale that once again there has been a push back. India Ratings thus expects PFCE growth to come in at 10.4 percent in FY22 compared with 10.8 percent projected earlier," it said.

Sinha said that the Indian economy had begun to witness a consumption slowdown even before the COVID-19 pandemic hit it.  The lockdown caused by COVID-19 in FY21 only aggravated it as jobs, livelihoods and household budget were severely Indented.

"Unlike the first wave, which was largely an urban phenomenon, the second wave spread to rural areas as well. Even if the agricultural output/income remains intact in view of the progress of monsoon so far, rural households are unlikely to loosen their purse strings in view of a likely rise in health expenditure as also the uncertainty/insecurity associated with the likely future waves of COVID-19," he said.

 
Arup Roychoudhury
first published: Aug 19, 2021 11:50 am
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