CRISIL estimates 9 per cent fall in India GDP in FY21

Rating agency CRISIL in its latest report has sharply lowered its forecast for India's gross domestic product (GDP) growth for the current fiscal 2020-21 (FY21) to (-) 9 per cent as against its earlier estimate of (-) 5 per cent projected in May, as Coronavirus infections are yet to peak and the government is not providing adequate direct fiscal support. It noted that this 9 per cent contraction will be the highest since the 1950s.

According to the report, a stretched fiscal position has constrained the government from spending more to support the economy. It noted that to date, the policy push to growth remained muted, except in pockets. The agency further said that if this pandemic were to peak out in September-October, GDP growth could move into mild positive territory towards the end of this fiscal. It indicated that with over 42 lakh COVID-19 cases, India overtakes Brazil to become the second worst-hit country. The report added that the pandemic will leave a permanent scar even as many analysts have been pitching for a sharp rebound or a V-shaped recovery.

The report expects a permanent loss of 13 per cent of the real GDP over the medium term, pegging its value in nominal terms at Rs 30 lakh crore and added that this is much higher than a 3 per cent permanent hit to GDP in Asia-Pacific economies estimated by its parent S&P. It said a catch-up with the pre-pandemic trend value of the real GDP would require an average real GDP growth to surge to 13 per cent annually for the next three fiscals, which India has never achieved before. It pegged September quarter GDP to contract by 12 per cent, attributing the same to higher economic activity seen in many indicators.