S&P SEES INDIA’S GDP SHRINKING 9% THIS FISCAL

NEW DELHI: S&P Global Ratings on Monday joined other economic forecasters in slashing India’s FY21 economic growth, citing rising coronavirus cases will keep private spending and investment in the country lower for longer than anticipated.

The rating company now expects the country’s gross domestic product (GDP) to shrink by 9% in the year to 31 March against its earlier estimate of a 5% contraction.

“One factor holding back private economic activity is continued escalation of covid,” said Vishrut Rana, Asia-Pacific Economist for S&P Global Ratings.

Last week, Fitch Ratings and Moody’s Investors Service cut their GDP estimates for FY21 to a contraction of 14.8% and 11.5%, respectively, while Goldman Sachs expects GDP to shrink 10.5% during the fiscal year.

India’s economy shrank 23.9% year-on-year in the June quarter, the steepest decline among G-20 countries. The pandemic, and the tight lockdown measures enforced to combat it, squeezed private consumption by 26.7% while fixed investment sank 47.1%. Higher welfare spending prevented an even sharper fall in growth. Agriculture cushioned the blow as it was the only major sector to expand, thanks to a favourable monsoon season.

While India eased the lockdown in June, S&P said it believes the pandemic will continue to restrain economic activity. New cases in India averaged nearly 90,000 per day in the week to 11 September, as per WHO. “As long as virus spread remains uncontained, consumers will be cautious in going out and spending, and firms will be under strain,” S&P added.