Rating agency, India Ratings and Research (Ind-Ra), has revised GDP estimates for India from 5.5 per cent to 3.6 per cent for FY21, due to Coronavirus and the resultant lockdown. Looking at the current scenario, the agency also revised the FY20 GDP forecast downward to 4.7 per cent from The National Statistical Office’s advance estimate of 5 percent. n my view, we should not worry about growth now. The focus should be on saving people’s lives whatever it takes. That is why I am appalled that the government has not yet announced FAP II after the miserly and disastrous FAP of 25th March," he tweeted
It expects the GDP growth to stand at 3.6 per cent in the fourth quarter of FY 20 and 2.3 per in the first quarter of FY 21.
Average growth is forecasted to decelerate to 2.8 per cent in first half of FY 21 and recover to 4.3 per cent in second half of FY 21 because of the base effect, a gradual recovery and restoration of supply chain.
The agency stated, “The initial and visible impact of the spread of COVID-19 on the India economy has been the disruption in the production of select manufacturing sectors due to the breakdown of supply chain, near collapse of the tourism, hospitality and aviation sectors and a rise in the workload of the healthcare sector.”
Micro, small and medium enterprises are also hit due to disruption of cash flow. A changed outlook of investors has led to a huge outflow of capital and the rupee has come under intense pressure. “Also, significant wealth erosion would impact the consumption levels.”
The delay in timely procurement could be a big blow to the farmer’s income and rural demand.
“A stop on the construction activities will accelerate the problems of the real estate sector which is still struggling to access funding in the middle of a meltdown in the NBFC and banking sectors. After agriculture, construction is the largest employment generator in the Indian economy.”
The agency claimed that there will be many companies who will move their manufacturing units from China with an AK to “de-risk operations”.
Ind-Ra believes this will require significant government and policy support and will play out only in the medium- to long-term.
