India’s economy may contract up to 15 per cent in the first quarter of the current fiscal and the full year’s GDP growth may contract up to 1 per cent.
Even as various organisations, including the UN, earlier predicted that India can dodge recession, fresh estimates after the extension of lockdown showed that the country’s economy may even sharply contract in the current financial year, let alone grow at a slow pace. India’s economy may contract up to 15 per cent in the first quarter of the current fiscal and the full year’s GDP growth may contract up to 1 per cent. The contraction in GDP in Q1 FY21 is expected to be more pronounced than ICRA’s earlier forecasts due to continuing spread of the Covid-19 warranting an extension in the lockdown for most activities, said Aditi Nayar, Principal Economist, ICRA.
The size of the GDP shrinkage would be contingent on the extent to which a graded resumption in activities is permitted in some areas post-April 20 and the magnitude by which government spending is stepped up to cushion the blow from the lockdown, she added. Earlier, a United Nations Trade report sad that the world economy will go into recession this year with a predicted loss of trillions of dollars of global income due to the coronavirus pandemic, spelling serious trouble for developing countries. However, it put India and China as likely exceptions among the countries that may slip into recession.
Besides ICRA, Barclays has also revisited India’s growth story and revised down the GDP growth for the country this year. Barclays said that India’s GDP growth for the calendar year 2020 would be 0.0 per cent, and FY21 growth would be a mere 0.8 per cent. It added that the economic impact appears to be worse than expected as India has headed into a longer complete shutdown to combat the rising number of COVID-19 cases.