Covid surge brings renewed challenges for India: Fitch

Forecasts GDP growth at 9.5% in the current fiscal

May hit economic recovery

– The sudden and steep surge in the number of Covid cases has swamped the health system, which seemed to have collapsed

– While containment measures will weigh on India’s ongoing economic recovery, the localised nature of restrictions means the actual impact is likely to be much less severe relative to April-June 2020 when a strict nationwide lockdown was imposed, Fitch said

New Delhi, May 6

The spiralling crisis from resurgence of Covid cases in India has dented support for the ruling BJP but voter support for Prime Minister Narendra Modi and his party will remain strong over the coming quarters and through this humanitarian crisis, Fitch Solutions said Thursday.

The sudden and steep surge in the number of coronavirus cases – the highest-ever 4,12,262 new infections and a record 3,980 daily death toll in a day – has swamped the health system, which seemed to have collapsed.

While containment measures will weigh on India’s ongoing economic recovery, the localised nature of restrictions means the actual impact is likely to be much less severe relative to April-June 2020 when a strict nationwide lockdown was imposed, Fitch Solutions said.

It forecast real GDP to grow 9.5% in 2021-22 (April 2021 to March 2022).

Risks to this forecast are to the downside, as the surge in new daily Covid caseloads will most likely see an extension and expansion of lockdowns, it said, adding the resurgence of Covid cases exposed cracks in the Indian healthcare system.

“While there appears to be signs that the spiralling Covid crisis in India has dented support for the ruling BJP, we maintain our view that voter support for Prime Minister Modi and the BJP will remain strong over the coming quarters and through this humanitarian crisis,” Fitch Solutions said.

This second wave in India has been widely attributed to the B.1.1.7 variant – first identified in the UK – which had ramped up cases in Punjab. Another possible culprit is a homegrown variant, B.1.617, with two worrying mutations that originated in Maharashtra, the worst-affected state.

“In addition to this, in India, a year of Covid fatigue gave way to an ill-advised euphoria over herd immunity as cases began to dip in January 2021.

“Inadequate government measures and people not adhering to public health guidelines, such as wearing face masks and maintaining social distancing, are also the main reasons for India’s upward tick in infections,” it said.

It added that a number of political, social and religious events and elections for local bodies in multiple states and preparation for Assembly elections in others also created an opportunity for the virus to move fast.

Fitch Solutions said in March this year, a few weeks before the new surge, Health Minister Harsh Vardhan, who is also a physician, asserted that India was in the “endgame” of the Covid pandemic, justifying the government’s decision to export medical resources to other countries.

India exported around 193 million doses of vaccines.

Fitch Solutions said “the perception that Prime Minister Narendra Modi’s administration has considerably mismanaged the Covid crisis will weigh on his and the BJP’s popularity somewhat. Some of this erosion in popularity is evidenced in the state elections”.

“A less-than-stellar performance at these polls adds to the political challenges the BJP had been facing in recent months, which include the anti-farm reform protests by farmers and anti-BJP government sentiment on social media platform Twitter amid the resurgence in Covid cases, which the government has sought to suppress.

“For now, however, we are cautious against concluding that the BJP’s support has weakened across the country, given Modi’s strong personality-led support across the country, which we believe can still sustain through this humanitarian crisis,” it said. — PTI