Amid rising number of coronavirus cases and localised lockdowns in the country, a ratings agency has further downgraded India GDP outlook for the ongoing fiscal. “ICRA has sharply revised its forecast for the contraction in Indian GDP in FY2021 (at constant 2011-12 prices), to 9.5% from its earlier assessment of 5.0%,” a report said. The same can be attributed to a rising number of coronavirus infections which has also led to a spate of localised lockdowns in some states and cities. As cities go back to lockdown again, the nascent recovery that was made in May-June 2020 has also been checked.
“The Indian economy had started to recover from the troughs experienced in April 2020, when the lockdown was at its severest, and many sectors seemed to be adjusting to a new normal,” Aditi Nayar, Principal Economist, ICRA, said. However, the recovery has now come to a halt as India continues to report fresh cases and is among the worst affected countries across the globe.
India had imposed a nationwide lockdown on 24th March 2020 to check the spread of the virus. However, the government had lifted restrictions in June to allow economic recovery. While economic activities had started to pick up, a rise in cases has again pushed the economy backwards. “Given the severity of the pandemic and the duration of the safety measures that need to be employed, we now expect a deeper pace of GDP contraction in Q2 FY2021 relative to our earlier forecast,” ICRA said. As several states go back to lockdown, supply chains and consumption patterns are also likely to be hampered again.
While it was expected that India will have a firmer recovery by Q3FY21, the same has now been pushed to Q4FY21. However, that will also depend on the availability of vaccine after which normal travel and recreational activities are likely to pick up pace again.