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India country report shows risk
The latest country report on India by Atradius (www.atradius.co.uk) shows that despite economic growth forecast to continue in 2022, downside risks will impact on businesses around the world who are reliant upon goods from the region.
After a severe 7.0% contraction in 2020, India’s economy rebounded by 8.2% last year after a combination of factors including lower interest rates, higher government spending and an accelerated vaccination programme. As a result, economists at Atradius are forecasting India will have a healthy 8% increase in GDP by the end of 2022.
However, downside risks remain due to the spread of the Omicron variant, and despite Government efforts to complete the rollout by 2021, only 64% of India’s adult population was fully vaccinated by the end of 2021. Atradius warns that India’s continued economic growth will rely heavily on the success of the vaccine rollout to its remaining unvaccinated population.
Manufacturing disruptions in the region are continuing with the capacity utilization rate still 20 percentage points below optimal level. Credit risk is high in the textiles, paper and machinery/engineering sectors and Atradius warns that India’s business performance is below long-term trends. This is partly due to labour shortages and India’s strained relationship with China, impacting industries heavily dependent on imports such as consumer durables and machinery.
“India has made an incredible economic recovery since 2020 and the outlook across many sectors is promising. However, businesses must ensure they proceed with caution,” says Damien Dawson, Regional Manager, Atradius UK. “The increase in activity following the easing of restrictions is set to drive growth in domestic demand over the next year, leading to a rise in imports. This increase, alongside recent disruption to supply chains and an increase in input prices, presents an opportunity for exporters.”
Atradius’ performance report for electronics/ICT, construction, metals, and steel in India upgraded the credit risk from ‘poor’ to ‘fair’ in 2022. ICT added output is forecast to grow by more than 9% in 2022. The construction industry is also expected to grow in 2022, with annual growth of 8% forecast, and the food and beverages output is positive with predicted growth of more than 3% in 2022.
“Strategic planning and comprehensive trade credit insurance continue to be vital when entering new trade markets or maintaining good trade relations,” says Dawson. “At Atradius, our experts continually observe and evaluate global markets to provide accurate insights allowing us to support businesses to identify opportunities, warn of risks and ensure relations progress under a futureproof foundation.”
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