GDP to contract by 9% in FY 21: Crisil

Mumbai, September 10

The Indian economy will contract by 9% in 2020-21 as the coronavirus infections are yet to peak and the government is not providing adequate direct fiscal support, ratings agency Crisil said on Thursday.

Revised forecast

• In May, Crisil had estimated the economy to contract by 5%. The latest projection comes days after official data for the June quarter showed a contraction of 23.9% in the economy
• Crisil said the 9% contraction will be the highest since the 1950s
• It expects a permanent loss of 13% of real GDP over the medium term, pegging its value in nominal terms at Rs30 lakh crore

In May, Crisil had estimated the economy to contract by 5%. The latest projection comes days after official data for the June quarter showed a contraction of 23.9% in the economy. Crisil said the 9% contraction will be the highest since the 1950s.

The government had announced a Rs 20 lakh-crore relief package but the actual new spending was less than 2% of GDP.

“With the pandemic’s peak not yet in sight and the government not providing adequate direct fiscal support, the downside risks to our earlier forecast have materialised,” the agency said.

“A stretched fiscal position has constrained the government from spending more to support the economy. Till date, the policy push to growth remains muted, except in pockets. Our May forecast had assumed additional direct fiscal support of 1% of GDP, which has not come through,” the agency said. — PTI