The global rating agency Fitch Ratings on Monday said the shock to economic activity from the second wave of COVID-19 pandemic will be less severe than the one in 2020, but recovery is likely to be delayed as economic activity dropped in April-May.

Fitch said there are growing indications that the latest wave of COVID-19 infections will add to risks among financial institutions (FIs) and anticipates that the RBI may introduce additional measures to support the financial sector if indications of economic stress mount.

''We expect the shock to economic activity from the latest wave of the pandemic in India to be less severe than in 2020, even though caseloads and fatalities are much higher... Nonetheless, indicators show activity dropped in April-May, which is likely to delay the country's recovery, and the number of newly recorded cases remains extremely high”… adding that ''There is a risk that disruption could persist longer and spread further than our baseline case assumes, particularly if lockdowns are introduced in more regions, or nationwide.

India is facing the world's worst outbreak of COVID-19 cases with more than 3 lakh new daily COVID-19 cases being reported for two weeks now and the new cases reached more than 4 lakh new daily cases over the weekend. Over 2.46 lakh people in India have died from the virus infection. The public health system is buckling under the weight of surging infections and deaths with several parts of the country reporting shortage of hospital beds, medical oxygen, medicines and vaccines.

Fitch Ratings last month had said that the resurgence of COVID-19 infections may delay India's economic recovery but won't derail it, as it kept the sovereign rating unchanged at 'BBB-' with a negative outlook.  It also projected a 12.8 percent recovery in GDP in the fiscal year ending March 2022 (FY22). Indian economy is estimated to have contracted 8 percent in the last fiscal, which ended March 2021.

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