Coronavirus Outbreak: Ind-Ra cuts India's FY21 GDP growth further to 1.9%, lowest in 29 years

India Ratings and Research (Ind-Ra) on Monday revised its FY21 economic growth forecast for the country further down to 1.9 percent, lowest in the last 29 years, citing the COVID-19 pandemic and the subsequent lockdown

Press Trust of India April 27, 2020 14:05:23 IST
Coronavirus Outbreak: Ind-Ra cuts India's FY21 GDP growth further to 1.9%, lowest in 29 years

New Delhi: India Ratings and Research (Ind-Ra) on Monday revised its FY21 economic growth forecast for the country further down to 1.9 percent, lowest in the last 29 years, citing the COVID-19 pandemic and the subsequent lockdown.

According to Ind-Ra, the Indian economy had registered a GDP growth of 1.1 percent in the financial year 1991-92.

In a note on Monday, Ind-Ra revised its economic growth estimate for the country from its forecast of 3.6 percent published on 30 March, 2020 to 1.9 percent.

Coronavirus Outbreak IndRa cuts Indias FY21 GDP growth further to 19 lowest in 29 years

Representational image. Reuters.

Ind-Ra, noted that its growth projection is based on the assumption that the partial lockdown will continue till mid-May 2020.

According to Ind-Ra, "GDP may come back to the fourth quarter of 2019-20 fiscal level only by the third quarter (October-December) of current 2020-21 fiscal anticipating resumption of normal economic activities during the second quarter (July-September) of 2020-21 and festive demand during the third quarter of current fiscal (October-December)," it said.

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The rating agency, however added that if the lockdown continues beyond mid-May 2020, and a gradual recovery takes root only from June-end, GDP growth may slip further to negative 2.1 percent, lowest in the last 41 years, and only the sixth instance of contraction since the fiscal year 1957-58.

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According to Ind-Ra, India's GDP in 1957-58 was negative 0.4 percent, in 1965-66 it was negative 2.6 percent, in 1966-67 it was negative 0.1 percent, in 1972-73 it was negative 0.6 percent, and in 1979-80 it was negative 5.2 percent.

For 2020-21, Ind-Ra expects retail inflation at 3.6 percent.

The rating agency said on the fiscal front, the dip in tax/non-tax revenue due to the lockdown/growth slowdown coupled with the need to provide fiscal stimulus will destabilise the fiscal arithmetic of both union and state governments.

"Even without any significant fiscal stimulus Ind-Ra expects the fiscal deficit of the union government to escalate to 4.4 percent of GDP in 2020-21 fiscal (FY21 Budget Estimate: 3.5 percent of GDP) and a stimulus package of Rs 4 trillion would push it to 6.0 percent of GDP," it said.

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