Fitch Ratings, CRISIL, SBI Research see India economy shrinking in FY21

CRISIL said it expected the current quarter's GDP to shrink 25 per cent year on year.

Fitch ratings, CRISIL, and SBI Research have drastically cut India’s economic growth forecast in the current fiscal year due to a prolonged lockdown. While both Fitch and CRISIL projected the economy to contract 5 per cent, from their earlier estimates of the economic growth at 0.8 per cent and 1.8 per cent, respectively, SBI Research slashed economic contraction to 6.8 per cent from earlier 4.7 per cent.

CRISIL said it expected the current quarter’s GDP to shrink 25 per cent year on year.

In its latest report, CRISIL said it would really be a long road to recovery and going back to the pre-Covid-19 trend level of gross domestic product (GDP) in India will not be possible for the next three fiscal years. The lockdown extension, higher economic costs, and an economic package that lacked muscle are the three key reasons why CRISIL has downgraded the GDP forecast.

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“The economic costs, now beginning to show up in the hard numbers, are far worse than our initial expectations. Given one of the most stringent lockdowns in the world, April could well be the worst-performing month for India this fiscal year,” it said.

Though the agency expects non-agricultural GDP to contract 6 per cent, agriculture could cushion the blow by growing at 2.5 per cent in FY21, CRISIL said.

SBI also calculated GDP growth taking bottom-to-top approach than earlier top-to-bottom one. As such, group chief economic advisor Soumya Kanti Ghosh estimated the district-wise, zone-wise loss in GSDP for each state and found that total GSDP loss due to Covid-19 for states stands at Rs 30.3 trillion, which is 13.5 per cent of total GSDP.

Coronavirus impact: Fitch cuts India growth forecast to 5.1% for FY21

The difficulties facing the Indian economy have been exacerbated by Yes Bank failure, it said.

Fitch Ratings on Friday cut India's growth forecast to 5.1 per cent for FY 2020-21, saying the coronavirus outbreak is likely to hit business investment and exports.

Fitch had in December 2019 projected India's growth at 5.6 per cent for 2020-21 and 6.5 per cent in the following year.

In its Global Economic Outlook 2020, Fitch said the number of people affected by coronavirus will keep rising in the coming weeks but that the outbreak will remain contained. However, there are downside risks to this scenario.

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"Supply-chain disruptions are expected to hit business investment and exports. We see GDP growth to remain broadly steady at 5.1 per cent in the fiscal year 2020-2021 following growth of 5.0 per cent in 2019-2020," Fitch said.

For 2021-22, Fitch projected India's growth to be 6.4 per cent.

"The outbreak of the virus is hitting sentiment, while local governments have rolled out measures to contain the spread of the virus, such as closing schools, cinemas and theatres. While India's linkages with China (e.g. trade and tourism) are modest, manufacturers in India are heavily reliant on key Chinese intermediate inputs especially of electronics and machinery and equipment," Fitch said.

The WHO has declared coronavirus pandemic. Over 2 lakh people have been infected globally and the disease caused by it COVID-19 has claimed over 9,000 lives. In India, there are about 195 positive cases and 4 deaths so far from the deadly virus.