1、 China Country Report Grab your readers attention with a great quote from the document or use this space to emphasize a key point. To place this text box anywhere on the page, just drag it. India Country Report Robust growth outlook for Indias economy in 2022, provided an accelerated vaccination rol

2、lout February 2022 Political Situation Government still in a strong position, but slowdown of reform efforts Prime Minister Narendra Modi and his government remain in a strong position. Modis Bharatiya Janata Party (BJP) has an absolute majority in the lower house of parliament, and the opposition r

3、emains weak on the national level. While the handling of the second coronavirus wave in early 2021 has dented Modis popularity somewhat, a rising vaccination rate should help him to retain his dominant position in Indian politics. With legislative elections in several states coming up in 2022 and 20

4、23, Modi will most probably avoid any initiatives that could weaken popular support for the BJP. Therefore, we expect the reform agenda to slow down further. After mass protest throughout last year, in November 2021 the government decided to abandon controversial agricultural reforms. Additionally,

5、after protests of some trade unions the administration postponed the enactment of new labour laws. Those aimed at increasing flexibility in the labour market, and to attract more domestic and foreign investment. On the international level, relations with China remain strained. After violent clashes

6、at the common border in June 2020, both sides have held several rounds of talks to solve the boundary dispute, but no agreement has been reached so far. New Delhi has further deepened ties with the US, Australia and Japan, sharing with them the strategic interest in balancing Chinas growing influenc

7、e in South Asia and the whole Asia Pacific region. The relationship with Pakistan remains tense, mainly due to the long-lasting conflict over the Kashmir region. Economic Situation The robust rebound continues, but downside risks remain Indias economy rebounded by 8.2% year-on-year in 2021, after a

8、severe 7.0% contraction in 2020. Coronavirus-related lockdowns and disruptions still hampered growth in H1, but with the easing of restrictions economic activity has picked up again since H2 of 2021. Lower interest rates, higher government spending, and an accelerated vaccination rollout have suppor

9、ted domestic consumption. In 2022, Indian GDP is forecast to increase by about 8%. However, downside risks remain to this outlook, mainly due to the current spread of the Omicron virus variant in India. Despite the aim of the government to complete the vaccination rollout by the end of 2021, as of D

10、ecember 31 only 64% of Indias adult population was fully vaccinated. Over the coming months, Indias economic growth momentum will depend on the ability to curb the coronavirus spread and to vaccinate the remaining population, including minors. Currently we expect that domestic consumption growth wil

11、l gain momentum after Q2 of 2022, provided that about 80% of the population will be fully vaccinated at that time. This should support private consumption, expected to increase by more than 10% this year. Investment has strongly rebounded by more than 16% in 2021, expected to increase further in 202

12、2, by about 7%. However, with the manufacturing capacity utilization rate still 20 percentage points below optimal level, there are concerns about the durability of the investment recovery. Still weakened balance sheets of businesses and financial institutions alike could result in a slowdown of inv

13、estment growth. Upgraded performance assessments of some key industries Due to the improvement in economic activity we have updated our business performance/credit risk situation assessment for electronics/ICT, construction, metals and steel from “Poor” to “Fair” since early 2021 (see chart above).

14、ICT value added output is forecast to grow by more than 9% in 2022. Indian construction is set to grow by about 8% annually in 2022 and 2023. The ongoing surge in construction activity, in particular in the civil engineering segment, is driving demand metals and steel, with output forecast to grow b

15、y about 9% and 11% respectively. Gradual fiscal consolidation about to start Government finances have deteriorated due to the pandemic, and the budget deficit will amount to about 7% of GDP in the fiscal year 2021/2022 (April 2021-March 2022). We expect that the government will start with fiscal con

16、solidation this year, albeit gradually. Revenues from disinvestments, monetisation of public sector assets and an expanded tax base will probably help to reduce the deficit to 6% of GDP in the fiscal year 2022/2023. Public debt will remain at about 60% GDP, which is high, but not at a worrying level

17、. Government debt is mainly financed domestically, and the external ratings are still investment grade. A moderate monetary tightening on the horizon In order to sustain the economy during the pandemic, the Reserve Bank of India (RBI) took measures to sustain the exchange rate and to provide liquidi

18、ty in the market. Regulations for offering new loans and classifying existing loans were eased. In H1 of 2020, the RBI lowered its benchmark interest rate by more than one percentage point, to 4%. In 2021, inflation remained within the RBIs target range of 2%-6%, enabling it to keep its monetary pol

19、icy accommodative. However, the surge in global energy prices and still ongoing supply side disruptions have started to push up input prices. This will most probably prompt the RBI to trigger a moderate interest rate increase in the course of this year. We expect a slight depreciation of the rupee a

20、gainst the USD in 2022 and 2023, due to Indias relatively high inflation (forecast 5% in 2022). A gradual strengthening of the USD (in view of a US Federal Reserves tighter monetary policy) will also contribute to this depreciation. However, at the same time large foreign exchange reserves will supp

21、ort the currency against major volatility. Indias liquidity situation remains good, with international reserves at almost eleven months of import cover in 2022, amply covering both the external financing requirement and short-term foreign debt. India has an excellent payment record, with no missed p

22、ayments since 1970, providing it with good access to capital markets. Still some woes in the financial sector The Indian banking sector remains under pressure due to a rather high volume of non-performing assets (NPAs). Those are concentrated with public banks, which account for more than 70% of the

23、 banking sector. NPAs surged in 2020 due to the adverse impact of the pandemic. However, government support mitigates risks in the financial sector. In order to strengthen the industry and to improve capital adequacy, ten public sector banks were merged into four with effect from April 1, 2020. The

24、finance ministry infused about EUR 1.6 billion in four public sector banks that are under the RBIs prompt corrective action, in order to improve their financial health. The gross NPA ratio of Indian banks has improved to 6.97% end of September 2021, compared to 7.32% end of June 2021 and 7.36% end o

25、f September 2020. However, monetary tightening in 2022 could curb corporate repayment capacities. This would subsequently affect the profitability of banks. Disclaimer This report is provided for information purposes only and is not intended as investment advice, legal advice or as a recommendation

26、as to particular transactions, investments or strategies to any reader. Readers must make their own independent decisions, commercial or otherwise, regarding the information provided. While we have made every attempt to ensure that the information contained in this report has been obtained from reli

27、able sources, Atradius is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this report is provided as is, with no guarantee of completeness, accuracy, timeliness or of the results obtained from its use, and without warranty

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