INDIA’S GDP TO CONTRACT BY 7.7% IN FY21: CRISIL

MUMBAI: Ratings agency Crisil on Monday revised upwards its FY21 GDP contraction estimate to 7.7% from the earlier expectation of 9%, and termed lower government spending as a “constraint” for growth.

The agency, which is a unit of Standard & Poor’s, said a faster than expected revival in the economic activity in the second quarter, which continued in the festival season, is the prime reason for the upward revision in its estimate. It said the pandemic, which has pushed the economy into contraction mode, will result in a permanent loss of 12% in real GDP terms. After its initial expectation of 9.5% GDP contraction in FY21, RBI revised up its estimate to 7.5% earlier this month. Other analysts have also revised upwards their projections as the unlocking of economy led to higher activities.

“A faster-than-expected revival in activity in the second quarter, which continues into the festive season, is one of the reasons for the revision. Consistent decline in the overall Covid-19 case load is the other,” the research wing of the rating agency said in a note on Monday.

It said “inadequate fiscal spending” remains a “constraint” for economic growth, and pointed out a possible second wave of Covid afflictions, uncertainty regarding availability of vaccine, and hiccups in global economic revival due to resurgence of cases as factors which call for caution.

The agency, however, said that the GDP will grow by 10% in FY22 on a very low base of previous fiscal year.