Rating agencies, both global and domestic, are
unanimous that the Covid-19 pandemic will be an economic tsunami for India.Even though
the country may not slip into a recession, unlike the Eurozone, the US, or
Asia-Pacific that have stronger trade ties to China, analysts believe the
impact on India’s GDP growth will be significant.India is
currently in the midst of a 21-day lockdown, that began on March 25, to contain
the spread of the coronavirus. The fallout of the move will spill over to
financial year 2021, which begins on April 1.Finance
minister on 26 March 2020 ,Nirmala Sitharaman announced a
$23 billion package aimed at cushioning the disruption. India’s central bank
joined the fight a day later with sharpest interest rates cuts and a slew of
unconventional measures aimed at making credit available to beleaguered
businesses.In India,
GDP growth is already at a decadal low and any further dent in economic output
will bring more pain to workers who have seen their wages erode in recent
times.
Various Agencies Forecast For Indian Economy
Standard & Poor’s:Earlier, global ratings agency S&P had estimated India’s GDP growth for financial year 2021 at 6.5%, which it now expects to fall to 5.2%. In the following year, growth is likely to be 6.9%, compared with 7% estimated earlier.
Crisil:In a note on March. 26, domestic ratings agency Crisil slashed its base case GDP growth forecast for India in financial year 2021 from 5.7% to 5.2%. It warned that there are further downside risks if the pandemic is not contained by April-June 2020, or if it spreads rapidly in India, affecting domestic consumption, and investment.The pandemic is a threat bigger in scale than the global financial crisis of 2008 as it “not only slams the brakes on economic activity and jeopardises financial stability, but also brings with it enormous human suffering not seen in decades,” Crisil said.
Various Agencies Forecast For Indian Economy
Standard & Poor’s:Earlier, global ratings agency S&P had estimated India’s GDP growth for financial year 2021 at 6.5%, which it now expects to fall to 5.2%. In the following year, growth is likely to be 6.9%, compared with 7% estimated earlier.
Crisil:In a note on March. 26, domestic ratings agency Crisil slashed its base case GDP growth forecast for India in financial year 2021 from 5.7% to 5.2%. It warned that there are further downside risks if the pandemic is not contained by April-June 2020, or if it spreads rapidly in India, affecting domestic consumption, and investment.The pandemic is a threat bigger in scale than the global financial crisis of 2008 as it “not only slams the brakes on economic activity and jeopardises financial stability, but also brings with it enormous human suffering not seen in decades,” Crisil said.
Fitch:In its
Global Economic Outlook 2020, released on March 20, Fitch Ratings said India’s
GDP will grow at 5.1% in financial year 2021. This is a downward revision of
its earlier estimate of 5.6%.
CARE Ratings:Mumbai-based
CARE estimates that growth in the January-March 2020 quarter could plummet to
1.5-2.5% “as the usual ramping up of production due in the year end could not
be implemented due to the shutdown.” Its earlier forecast was a 4.7% growth in
the period.However,
the real impact of the 21-day lockdown will be felt in the first quarter of
financial year 2021, it said. “With two-thirds of the impact being passed on to
the April-June quarter. This can potentially lead to a de-growth in GDP.”To
prevent GDP from contracting in the first quarter, there has to be a lot of
recouping in “the 10 weeks following the shutdown.” GDP can grow at 3% if there
is a recovery of losses and the lockdown ends on
April 14. Two factors that have to aggressively drive this recovery are
government expenditure and the banking sector which should augment credit to
all the sectors. Growth could be lower at 1.5-2% if this does not happen.
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