ICRA predicts 10% growth in Indian GDP, cautions slower recovery
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New Delhi: Rating agency ICRA on Wednesday said that the Indian GDP was expected to grow by around 10-10.5 per cent in the 2021-22 financial year. However, they also cautioned that the continuing resurgence in COVID-19 cases, as well as the enforcement of restrictions on business and movement, could dampen the pace of recovery for the Indian corporate sector.
The percentage of portfolio affected would be less than 2020, from 17% to 4% the agency said.
Six main sectors namely: aviation, hotels, restaurants and tourism, media and entertainment exhibitors, microfinance institutions, real estate-retail, and retail have been identified as most affected with severe disruptions pushing back their recovery timelines said the ICRA.
ICRA estimated that the impact of the second wave of the pandemic on many sectors to be lower than the first - an advantage from the less widespread and stringent lockdowns as of now vis-a-vis the prolonged nationwide lockdown last year.
"The pace of recovery would undoubtedly be arrested by the recent surge in Covid-19 infections and associated localised restrictions. The extent of the impact would take a cue from the timelines with which this spike plateaus, and then starts receding," said Ramnath Krishnan, President, Ratings, ICRA.
Another factor out forward by the ICRA is the availability of vaccines as well as the public response to the vaccination drive which they said would impact growth in times ahead.
The agency pointed out that risk aversion among lenders could pose a challenge to credit growth, which the rating agency projects at 7.3-8.3 per cent and 7-9 per cent respectively, for banks and non-banks. ICRA also expects asset quality pressures for lenders to rise and profitability normalisation to stretch beyond the financial year of 2022.
On the other hand, it said that the banking system's solvency profile is better than the pre-Covid levels, affording it a buffer to absorb shocks. ICRA highlighted that the NBFCs were maintaining liquidity to cover more than three-month debt repayments since the beginning of the last fiscal.
"Considering the emerging uncertainties because of Covid-19, which could affect their near-term collections and fresh debt raise, ICRA expects the liquidity profile to be maintained with adequate buffer to give comfort to various stakeholders," the organisation said.
As per ICRA, heightened investor caution on the asset quality of retail loan pools, especially for microfinance and unsecured SME loan pools, is likely to reduce securitisation volumes in the near term for the NBFCs.