Rating agency ICRA has revised its gross domestic product (GDP) forecast for 2020-21 to a contraction of 11 percent from an earlier estimate of -9.5 percent.
ICRA cited the continued rise in COVID-19 cases across the country as the reason for the change in GDP forecast.
According to official data, India's GDP shrunk 23.9 percent during the April-June period, amid a stringent COVID-induced lockdown.
ICRA expects the YoY GDP contraction to narrow to 12.4 percent in July-September quarter. It added that it expects the economic situation to improve in H2FY21, relative to the first half of the fiscal year.
"ICRA cautioned that if the pace of YoY decline in Q1 FY2021 gets revised below the initial estimate, after data for the MSME and less formal sectors becomes available, the overall GDP outcome for FY2021 could be even worse than the ratings agency’s expectations of an 11.0 percent contraction. Nevertheless, higher government spending, a faster global recovery, and an early decline in fresh COVID-19 cases could impart an upside to these forecasts," the rating agency said.
For Q3FY21, ICRA revised its GDP forecast to -5.4 percent from -2.3 percent. It also predicts economic contraction of 2.5 percent in Q4FY21, a downward revision from the previous estimate of 1.3 percent."With the pandemic continuing in India for over six months, we sense that economic agents are now adapting to the crisis, resulting in a graduated recovery to a new post-COVID normal. Nevertheless, with rampant COVID-19 infections, we expect behaviours to remain altered for longer than what we had earlier presumed," said Aditi Nayar, Principal Economist at ICRA.