Moody's slashed India's growth projection to 9.6% from earlier estimate of 13.9% for 2021

Earlier this month, Moody's had projected India to clock a 9.3 per cent growth in the current fiscal ending March 2022, but a severe second COVID wave has increased risks to India's credit profile and rated entities.

Indian economy contracted by 7.3 per cent in fiscal 2020-21 as the country battled the first wave of COVID, as against a 4 per cent growth in 2019-20.

Stating that stringent lockdowns in economically significant states will mar April-June quarter economic activity, Moody's said the 10 states that have been hardest hit by the second wave collectively account for more than 60 per cent of the pre-pandemic level of India's GDP.

Moody's said faster vaccination progress will be paramount in restricting economic losses to the current quarter. As of the third week in June, only about 16 per cent of the population had received one vaccine dose; of those, only about 3.6 per cent had been fully vaccinated.

"Mobility and economic activity will likely accelerate in the second half of the year as the pace of vaccinations pick up. The government recently announced a strategy to centralise vaccine procurement in order to boost vaccinations, which if successful, will support the economic recovery," it added.

India's second wave peaked in the beginning of May; since then, new cases and daily deaths have continued to fall, and the number of people who have recovered from the virus has exceeded the number of new infections since mid-May.

Daily deaths have continued to fall, and the number of people who have recovered from the virus has exceeded the number of new infections since mid-May.

"We assess the overall economic effect of the second wave to be softer than that during the first wave of the pandemic last year, although delivery of and access to vaccines will determine the durability of the recovery," Moody's added.