India's growth rate is expected to touch minus nine per cent during the current financial year 2020-21 according to a rating agency
The Internationally renowned rating
agency has forecast a grim picture of the Indian economy during the current
financial year. The growth rate is expected to plummet to minus nine per cent
as against minus five per cent according to earlier estimates of the rating
agency. Standard and Poor has predictions for India is based on the rising
Covid-19 cases that would keep private spending and investment lower for a long
cases in India will keep private spending and investment lower for longer
Rising COVID-19 cases in India will keep
private spending and investment lower for longer. S&P Global Ratings now
expects the country's economy to contract by 9 per cent in the current fiscal
year, which ends March 31, 2021, the US-based rating agency said in a
For 2021-22 fiscal, it expects economic
growth at 10 per cent. S&P had earlier forecast India's economic
contraction at 5 per cent.
It said risks to the growth outlook
include a weaker recovery in informal sectors of the economy and deeper
economic losses for micro and small enterprises.
"In addition, if credit quality
worsens materially following the expiration of loan moratoriums, the recovery
will slow. One factor that presents potential upside to growth is the
availability of a widely-distributed COVID vaccine earlier than our current
estimate around mid-2021," S&P added. It said the 23.9 per cent
contraction in the April-June quarter was larger than expected.
eased, pandemic will continue to restrain economic activity
"While India eased lockdowns in
June, we believe the pandemic will continue to restrain economic activity. New
cases per day in India averaged nearly 90,000 in the week ending September 11,
according to data from the World Health Organization."
As industrial activity is recovering
faster than services, high frequency indicators suggest that output is still
lower relative to the same period last year and hence growth for the
July-September quarter will be negative year on year.
However, rising food inflation has pushed
inflation to 6.9 per cent in July, higher than the upper band of the central
bank's 2-6 per cent target range. This will constrain the central bank from
cutting policy rates further, it said. S&P said India's high deficits limit
the scope for fiscal stimulus and, the targeted fiscal stimulus measures
announced so far amounts to about 1.2 per cent of GDP.