Crisil sees India GDP shrinking by 5% in FY21

NEW DELHI: Rating agency Crisil Ltd on Tuesday said the Indian economy may contract by 5% this fiscal, slashing its growth outlook for the year from 1.8% in April, holding that India’s economic package is unlikely to boost the economy in the short run and the partial lockdown continues to be a hindrance to normal economic activity.

Crisil said the recession in the current year could be India’s fourth since Independence and perhaps its worst. “In the past 69 years, India has seen a recession only thrice – as per available data – in fiscals 1958, 1966 and 1980. The reason was the same each time – a monsoon shock that hit agriculture, then a sizeable part of the economy,” it said.

The government has extended the lockdown three times till May 31 to deal with the rising number of coronavirus cases, curtailing economic activity severely.

“We believe successive lockdowns have a non-linear and multiplicative effect on the economy—a two-month lockdown will be more than twice as debilitating as a one-month imposition, as buffers keep eroding. Partial relaxations continue to be a hindrance to supply chains, transportation and logistics,” it added.

Crisil added that the economy is likely to contract 25% during the first quarter. “The first quarter will be the worst affected. June is unlikely to see major relaxations. Jobs and incomes will see extended losses as these sectors are large employers,” the rating agency said.