Second wave of COVID-19 poses danger to financial restoration; This autumn GDP to be hit: BofA Securities

The spike in coronavirus instances poses a danger to financial restoration, and the GDP is unlikely to realize the sooner projected 3 per cent development for March quarter 2020-21, Wall Street brokerage Bank of America (BofA) Securities stated on Friday.
Noting {that a} month-long nationwide lockdown can shave off 100-200 foundation factors off the GDP, the brokerage stated development continues to be weak, amplified by the steep fall in key financial exercise indicators and the anaemic mortgage development, and the surging pandemic instances is simply growing the troubles on the expansion entrance.
However, the report by BofA Securities didn’t supply a possible GDP quantity for the March quarter 2020-21.

The seven-component BofA India exercise indicator slowed to 1 per cent in February from 1.3 per cent in January, the report stated, as 4 of the 7 constituents of the India exercise index slowed in February over the earlier month.
The report additionally identified that this poses dangers to their 3 per cent actual GVA development forecast for the March quarter. The index had first time in 2020-21 turned optimistic in December 2020 after declining for 9 straight months.
Spike in pandemic instances poses a rising danger to restoration. “We estimate that a month of national lockdown costs 100-200 bps of GDP,” the report warned.
The pandemic caseload in India has been surging hitting new information on a regular basis for the previous fortnight. The newest official quantity places the each day infections at 2.17 lakh prior to now 24 hours and 1,185 deaths– each are the very best on the earth and greater than the mixed numbers of the second and the third most affected international locations– Brazil and the US.
The report stated it stays to be seen if the second wave subsides with no nationwide lockdown and famous that Maharashtra, which contributes over 16 per cent of nationwide GDP is already below lockdown until the top of the month because the state has greater than half of the brand new instances.
A bit of fine information is that actual lending charges are falling because of the regular RBI easing and normalization of core WPI and these elements ought to push 2021-22 mortgage development to 12 per cent from 5.6 per cent within the final fiscal 12 months. Real rates of interest are a proxy for pricing energy.

Falling actual lending charges will push up mortgage development. Despite some spike in inflation, the nominal marginal value of funds based mostly lending charge (MCLR) is now down 145 foundation factors since March 2019 and the true MCLR is decrease by 506 foundation factors since then. And so are the nominal and actual weighted common lending charges.
In sum, “an anemic loan growth only buttresses our view of a weak recovery,” the report concluded.