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India's economic recovery widened in Q2FY22 as the impact of Covid-19's second wave abated, ratings agency ICRA said.

In quarterly terms, half of the high frequency indicators recovered above their pre-Covid levels in Q2FY22, it said.

In Q1FY22 only three out of the 14 indicators had exceeded the performance in Q1FY20, with activity suppressed by the second wave of Covid-19.

"The economic recovery widened in Q2 FY2022 as the crisis wrought by the second wave of Covid-19 abated, with a larger number of sectors bettering their pre-Covid performance, relative to the position in Q1 FY2022," ICRA Chief Economist Aditi Nayar said.

"Nevertheless, the revival was multi-speed, with a considerable variation in the pace of growth across sectors. Moreover, there is growing evidence of a K-shaped recovery. This is evidenced by the sharp disparity in the performance of the stock markets, robust growth in direct tax collections, and improved business sentiment, juxtaposed with the continued pessimism displayed by urban households in the RBI's latest consumer confidence survey."

The ICRA noted that continued base normalisation, emerging supply-side constraints and excess rainfall dampened the year-on-year (YoY) performance of most of the high frequency indicators in September 2021.

In terms of YoY performance of 14 of the 15 high frequency indicators (except non-food bank credit) worsened in September 2021 compared to August 2021. The trend, according to ICRA, was on account of a combination of factors such as continued base normalisation, especially for motorcycles and scooters, domestic airline passenger traffic, and generation of GST e-way bills, supply side constraints such as non-availability of semi-conductors particularly for passenger vehicles and excess rainfall in September 2021.

"We currently project the real GDP in Q2 FY2022 to have mildly trailed the level of Q2 FY2020, led by a continued subdued performance of the contact-intensive sectors. Moreover, we expect a base-effect led moderation in the pace of YoY growth of real GDP to 7.7 per cent in Q2 FY2022 from 20.1 per cent in Q1 FY2022," said Nayar.

"Based on the total number of first doses of Covid-19 vaccines administered, the split between the different varieties and the relevant gaps between the two doses, we now expect 60-65 per cent of Indian adults will be fully vaccinated by end-December 2021, a sharp step up from the current 30 per cent. This will propel confidence, especially demand for the contact-intensive services during Q4 FY2022."