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Inflation | GDP likely to grow just 2% in 2020-21: Icra

Inflation | GDP likely to grow just 2% in 2020-21: Icra

Ratings agency


has sharply revised its forecast for India’s growth in the current fiscal to 2%, down from a range of 4.7% to 5.2% earlier, in an online update on Tuesday.

It also lowered its estimate for gross domestic product (GDP) growth in FY20 to 4.4% from 4.7% earlier. The revisions came just under two weeks of the previous estimate on March 24.

The agency cited the impact of the lockdown on discretionary activities like travel and tourism and labour-intensive industries like construction and manufacturing of non-essential goods as the reason behind the revision.

“We now expect an impact of social distancing followed by the lockdown to limit GDP growth to 2.4% in Q4FY20 and result in a contraction of 4.5% in Q1FY21…profitability is likely to be severely squeezed with lower commodity prices which would weigh upon GDP growth. Overall we expect the annual GDP growth to ease from 4.4% in FY20 to 2% in FY21,” said Aditi Nayar, principal economist at ICRA.

ICRA expects a sharp downturn in manufacturing and services sector indicators however, a healthy outlook for rabi crop could provide support through improved rural demand.

The outlook will be close to zero for construction and discretionary activities, especially tourism during the lockdown period, Nayar said, adding that output would be sharply curtailed in banking and transport and moderately curtailed in mining and electricity sectors.

On the other hand inventory restocking for essential items may result in a production boost once factory output is resumed after the lockdown period, she said.

Additionally, increased government expenditure would cushion the extent of the slowdown, ICRA said.

( Originally published on Mar 27, 2020 )

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