India's GDP may fall by 6.4% in FY21: Care

MUMBAI: Care Ratings revised India's GDP growth forecast for the current financial year to (-) 6.4% as economic activity continues to be under restriction due to the lockdown on account of the COVID-19 pandemic.

Care, in May, had projected a decline in GDP growth of 1.5-1.6% in FY21.

It said given that the nation is into a lockdown for July too with several restrictions on resumption of services in particular as well as movement of people, the cutoff date for normalcy will spread into the latter part of the third quarter and more likely to the fourth quarter.

"Under these assumptions our forecast for GDP growth is now (-) 6.4% for FY21 with GVA (de)growth estimated to be around (-) 6.1%," Care Ratings said in a report. The sharper fall in real GDP also means that the nominal GDP for the year will also decline assuming inflation of 5% which in turn will affect the projected fiscal deficit number of the central government which will be in the region of 8% for FY21, it said.

In FY20, the country's economy grew at an estimated 4.2%, almost a decade low. It, however, said the positive growth will come from only agriculture and the government sector.

The agency's May estimate for a decline in GDP growth of 1.5-1.6% was based on the assumption that the lockdown would be ending by the month-end and that the recovery process will be gradual and be calibrated across sectors with the second half being closer to normal.

GDP forecasts for FY21 are unique as they would be varying depending on the evolving situation and the assumptions being made on the recovery process in the country, the report said.