While containment measures will weigh on India's ongoing economic recovery, the localised nature of restrictions means that the actual impact is likely to be much less severe relative to lockdown.
S&P forecasts 11 per cent growth for India this fiscal, flags 'substantial' impact of broader lockdowns
In its report on Asia-Pacific Financial Institutions, S&P said the control of COVID-19 remains a key risk for the economy.
China’s economic growth surged to 18.3% over a year earlier in the first quarter of this year as factory and consumer activity recovered from the coronavirus pandemic.
The forecast of India's growth rate for 2021 is noted to be higher than any other major economy in the world including US which is calculated to be 5.5 per cent.
Policymakers had expected positive GDP growth in January-March to restrict the annual FY21 contraction to 7.5-8 per cent.
'The evidence we were getting in the last couple of months in terms of the normalisation of economic activity,' IMF Chief Economist Gita Gopinath said
'Despite a robust reduction in new COVID-19 cases and the start of vaccine roll-out, India's 2021 economic output is expected to remain below the 2019 level,' said the report.
Economic revival to continue 'unabated'; rising Covid cases a concern, but lockdowns unlikely: RBI Guv
'The renewed surge in COVID cases in many parts of the country is a matter of concern,' the governor said.
Domestic and external demand has been on the mend since the easing of restrictions, which has led to improved manufacturing output in recent months.
Policymakers will continue to support economic activity long after the pandemic has faded, in some cases for years, Moody's said.
While India has become one of the few major economies to post growth in the last quarter of 2020, the annual GDP estimate for the fiscal year ending March 31 has been revised to an 8% contraction.
For current fiscal, the US-based rating agency expects the economy to contract 7 per cent, lower than its previous estimate of 10.6 per cent contraction.
PM Narendra Modi said that the initiatives taken by the government would provide opportunity to everyone to participate in nation building to its full potential.
The report expects the large local market potential, low labour costs, macroeconomic stability and the hope of strengthening ongoing reform momentum will help achieve these objectives.
Kumar further said that due to a big decline in the GDP during the current financial year, the budget estimates have gone completely out of gear and, therefore, there is a need to correct the Budget.