You are here: Home » Economy & Policy » News
Business Standard

Crisil projects wider GDP contraction for FY21 at 9%, from 5% earlier

Attributes it to Covid-19 cases and lack of stimulus from govt

Topics
India GDP growth | India GDP | Lockdown

Indivjal Dhasmana  |  New Delhi 

gdp
India's GDP fell 23.9 per cent in the first quarter of FY21

on Thursday predicted India’s gross domestic production (GDP) to contract 9 per cent in the financial year 2020-21 (FY21), revising its forecast down from 5 per cent owing to uncertainty over the spread of Covid-19 and lack of adequate fiscal support from the government.

The revision in the forecast comes days after the official data showed fell 23.9 per cent in Q1. The rating agency sees the economy contracting 12 per cent in Q2.

In a report, it said if the infections were to peak in September-October, growth could move into positive territory towards the end of FY21. “Even in that event, manufacturing is expected to revive faster compared to services. But the risks to our outlook remain tilted to the downside till such time a vaccine is found and mass produced.”

ALSO READ: India needs more banks to double credit-to-GDP ratio to 100%: RBI official

sees the medium-term growth path for India trending down. “We see growth at 10 per cent in FY22, on the back of a very weak base and some benefit from the rising-global-tide-lifting-all-boats effect. Even with that, real will only merely catch up to FY20 level by FY22.

Beyond that, we see growth averaging 6.2 per cent annually over the next three years — between FY23 and FY25.”

It said 13 per cent of GDP at constant prices will be permanently lost in the medium term. Calling for reforms to revive investments and create jobs, said the truth with reforms is that you bite the bullet first and reap the benefits later. To balance it out, the rating agency said the government needs to take more steps to address the current pain in the economy. It should stretch itself fiscally to support vulnerable households and small businesses hit hard by the pandemic.

ALSO READ: Rating firms rework their India FY21 GDP forecasts with sharper contraction

This will also help preserve productive capacity in the economy and together with reforms can create a sustainable push to growth over the medium term.

Meanwhile, said the economy is recovering from the lows seen in Q1. However, the pace of improvement in Q2 is fragmented with a sharper momentum in industry relative to services amid a continuing healthy outlook for agriculture. “In our view, the contraction of GDP will norrow considerably to 11-13 per cent in Q2,” it said. maintained its forecast for contraction at 9.5 per cent for FY21.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, September 10 2020. 17:44 IST
RECOMMENDED FOR YOU
.