The Economic Outlook Survey by the Federation of Indian Chambers of Commerce & Industry (FICCI) puts forth annual GDP growth forecast for 2020-21 between (-) 6.4 percent and 1.5 percent.
"There were already signs of an impending slowdown in the economy, which have been sharply accentuated by the COVID-19 pandemic induced lockdown. The spread of COVID-19 pandemic has severely hit global as well as domestic growth," the report said.
Economic activity wise, the annual forecast indicated average growth of 2.7 percent for agriculture and allied activities for 2020-21. According to the report, agriculture seems to have an apparent upside as far as the performance of monsoon is concerned this year and the water reservoir levels in the country stand at good levels.
The rural sector supported by a steady agriculture performance and a contained number of COVID-19 cases would be a key demand generator for India this year.
"Further, the direct income support through PM-KISAN and increased allocation to MGNREGA is helping the returnee migrants - lending support to the rural economy," the report said.
Industry and services sector, on the other hand, are expected to contract by 11.4 percent and 2.8 percent respectively in 2020-21. Weak demand and subdued capacity utilization rates were already manifesting a drag on investments and the Covid-19 pandemic has further extended the timeline for recovery, according to the report.
"Even though activity in sectors like consumer durables, FMCG etc. is gaining traction, majority of the companies are still operating at low capacity utilization rates. Labour availability and feeble demand remain as major issues for the companies," the forecast said.
The report suggests that fresh investments would be difficult to come by in the near to medium term. A significant change in consumption patterns is expected due to uncertainty in jobs and income losses.
"Expenditure on non-essential goods is likely to remain under check for some time. In fact, the share of private final consumption expenditure in GDP has already reported a decline from 59.9 percent in Q3 FY20 to 55.9 percent in Q4 FY20.
Absence of demand stimulus, a second wave of the pandemic and continuation of social distancing and quarantine measures would weigh heavy on growth prospects, the report said.
"With demand and investment outlook muted, robust government expenditure has been the only saviour. Nonetheless, growth is likely to bottom out post the second quarter of current fiscal year," the report said.