India’s real GDP will likely shrink by as much as 11.8%, year-on-year, in FY21, India Ratings said on Tuesday, revising down its earlier forecast of a 5.3% contraction.
However, the economy could witness a 9.9% expansion in the next fiscal, largely on account of a favourable base effect, but a meaningful recovery in the wake of the Covid-19 pandemic will likely be a “long-drawn” process, the agency said.
All indicators, be it mobility or consumption, are pointing towards a much weaker economic recovery, India Ratings chief economist DK Pant and principal economist Sunil Sinha said in a webinar. The economic loss in FY21 is estimated to be Rs 18.44 lakh crore. India’s real GDP contracted by as much as 23.9% in the June quarter, much higher than the level witnessed by any other major economy.
India Ratings said out of 35 states and Union territories, workplace mobility improved only in 16 states/UTs between end-May and end-August.
As the number of Covid-19 infections picked up significantly across India in July, leading to local or regional lockdowns, mobility in many states/UTs reduced by end-August from end-June.
As human mobility is closely linked with economic activity, even gross state domestic product weighted workplace mobility depicts a similar trend as the workplace mobility, the agency said.
“After a pickup in June to 70% of baseline, it declined to 68.5% in July. However, the August (70.3%) data again shows a pickup. Ind-Ra believes the work place mobility would remain low even in the next few months and would not return to normal till a vaccine is found,” it said.
With this, India Ratings has joined a number of established agencies in forecasting a somewhat difficult path to a sustained recovery for the Indian economy. Of course, any such projection is closely tied to the country’s progress in hadling the Covid-19 pandemic, its economists reckon.
The agency now expects the agriculture and allied sector to grow at 3.5% in FY21. However, industry and services will witness a contraction of 24.2% and 9.9%, respectively, this fiscal, it added.