Economic recovery is yet to attain durability, says ICRA

‘Early data for Jan. is weak following reimposition of curbs to check third wave’

Rating agency Icra said while there was some evidence of the economic recovery becoming broad-based in the third quarter of fiscal 2022, it was yet to attain the durability being sought by the Monetary Policy Committee as a precursor to policy transmission.

The agency expects real GDP to expand 6-6.5% year-on-year in the third quarter (8.4% in Q2 FY2022). It also sees the RBI maintaining the status quo in the upcoming monetary policy review to be held in February.

Chief Economist Aditi Nayar said economic activity rebounded in December, even as many sectors continued to trail the performance recorded in October.

Encouragingly, the quarterly data suggests a modest broad-basing of the recovery in Q3 FY2022, relative to Q2, when compared to respective pre-COVID-19 volumes.

“However, the onset of the third wave of COVID-19 has triggered State-wise restrictions, which have expectedly interrupted the momentum in the ongoing month, reiterating that the recovery is yet to attain durability,” Ms. Nayar said in a report released on Wednesday.

The agency said the y-o-y performance of 10 of the 15 high-frequency indicators improved in December compared to November 2021.

These include generation of GST e-way bills, non-oil merchandise exports, electricity generation, two-wheeler output as well as aggregate deposits and non-food credit of scheduled commercial banks.

Ms. Nayar further said that following the reimposition of State-wise restrictions to curb the third wave of COVID-19, the early data for January 2022 was expectedly weak.

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