Crisil revises India’s GDP forecast to -7.7% for FY2021

The rating agency Crisil on Monday revised India’s GDP forecast to minus 7.7 percent with a warning that we are not out of the woods yet.

CRISIL now sees India's fiscal 2021 real gross domestic product (GDP) contracting 7.7% compared with a contraction of 9% forecast in September. 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, Crisil said in its report.

In fiscal 2022, GDP growth is expected to spurt to 10%, led by a very weak base and some global ‘rising tide’ effect. “We estimate a permanent loss to the economy at ~12% in real GDP terms,” the rating agency added.

GDP contracted 7.5% on-year in the second quarter –much better than the contraction of 23.9% in the first quarter. Pent-up demand, support from agriculture and select export sectors, and cost savings for corporates, engineered this recovery.

For fiscal 2022, Crisil expects GDP growth to shoot up to 10.0% supported by a very weak base and some benefit as the global economy fares better and provides a lift to India’s exports. Services are expected to take longer to recover than manufacturing. Beyond that, growth is seen averaging at ~6.2% annually between fiscals 2023 and 2025.

Crisil estimates the permanent loss on account of this at ~12% in real GDP terms. Even with that, India is seen growing faster than the world beyond fiscal 2022.

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