Indian Economy may contract by 11 percent during Financial Year 2020-21, worse than previous estimate

Domestic rating agency ICRA (Investment Information and Credit Rating Agency of India Limited (IICRA India)) on Monday further downgraded the country’s GDP projections, stating that the Indian economy may contract by 11 percent during Financial Year 2020-21. The rating agency had earlier predicted a 9.5 percent contraction. ICRA revised its estimates, saying that the rate of Covid-19 infection in the country remains high.

After the official figures of growth for the first quarter of the current financial year, some analysts have said a contraction of 14 percent during FY 2020-21. GDP(Gross Domestic Product) declined by 23.9 percent in the first quarter. The ratings agency said that estimates of GDP contraction during FY 2020-21 could be worse if figures for the first quarter of the current fiscal are revised downwards after figures from small businesses and the informal sector come out.

The rating agency currently maintains a 12.4 percent contraction estimate for the ongoing second quarter. ICRA chief economist Aditi Nair said, “With the epidemic continuing for more than six months in India, we understand that the economic components are now reconciling with the crisis, leading to a gradual recovery after the Covid epidemic. With the massive Covid-19 infection, this situation may persist for longer than our previous estimates.”