indian economy: S&P projects Indian economy to contract 5% in FY’21


S&P Global Ratings on Thursday forecast Indian economy to contract 5 per cent in the current fiscal as the lockdown imposed to contain COVID-19 pandemic has curtailed economic activity severely. “We have lowered our growth forecast for fiscal year ending March 2021 to a 5 per cent contraction. We currently assume that the outbreak peaks by the third quarter,” S&P said in a statement.

Earlier this week rating agencies Fitch and Crisil too had projected a 5 per cent contraction for the Indian economy. “The COVID-19 outbreak in India and two months of lockdown — longer in some areas — have led to a sudden stop in the economy. That means growth will contract sharply this fiscal year. Economic activity will face ongoing disruption over the next year as the country transitions to a post-COVID-19 world,” S&P said in a statement. COVID-19 has not yet been contained in India. New cases have been averaging more than 6,000 a day over the past week as authorities begin easing stringent lockdown restrictions gradually to prevent economic costs from blowing out further.

Policymakers have grouped geographical zones into red, orange, or green categories based on the number of cases. Areas currently classified as red zones are also economically significant, and the authorities could extend mobility restrictions. “We believe economic activity in these places will take longer to normalize. This will have knock-on impacts on countrywide supply chains, which will slow the overall recovery. We expect varying degrees of containment measures and economic resumption across India during this transition,” S&P said.


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