The rising number of COVID-19 infections has reignited uncertainties related to India’s near-term outlook, according to domestic rating agency ICRA Ratings, which recently said the uncertainty will persist over the next few months until vaccines become available for all adults.

The agency forecasts a 10-11 per cent gross domestic product (GDP) growth in fiscal 2021-22 and a key upside to the projection is a faster-than-expected pick-up in government spending in this fiscal.

The key risks to the recovery are the sustenance of the latest wave of COVID-19 infections and its spread to additional states, the existing vaccines not being effective enough against new variants of the infection, and a spike in commodity prices to a level that starts to constrain demand, the rating agency added.

If the trend of increasing infections and localised lockdowns proliferates, it would temper the extent of the base effect-led recovery anticipated in the immediate term, and may lead to some supply-side disruptions, the agency cautioned.

During January-February 2021, the performance of half of the 14 lead indicators tracked by ICRA faltered relative to their year-over-year trend in the third quarter of the financial year 2021, such as the output of Coal India, electricity generation, diesel and petrol consumption, rail freight traffic, motorcycle sales and generation of goods and services tax e-way bills.

In contrast, there was an improvement in the performance of non-oil merchandise exports, ports cargo traffic, sales of scooters, passenger vehicles and tractors, and passenger movement by airlines, ICRA added.