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ICRA sharply cuts India’s GDP growth forecast for FY21 at -5%

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Icra warns of deep recession, GDP to contract 5 pc in FY21On May 20, 2020, ICRA Limited (formerly Investment Information and Credit Rating Agency), an Indian independent and professional investment information and credit rating agency, has sharply reduced India’s FY21 (Fiscal Year 2020-21) growth forecast to minus 5 % from 1%,-2% growth predicted earlier, due to the multiple extension of lockdown and labour mismatches results in further delays in supply chain resumption.

Key Points:

i.It has also reduced the growth forecast in first quarter (Q1) of FY2021 to 25 % as compared to the previous forecast of 16-20 % and to minus 2.1 % in Q2 as against the  2.1 % growth predicted earlier. It implied the economy was in recession.

ii.However, the agency predicted better growth of 2.1 % growth in Q3 (against previous estimate of 3.6 %) and 5 % in Q4 of current FY 2021. It expected a V-shaped recovery for the economy based on the assumption that the lockdown would be cleared within the first quarter. However, the recovery will like W-shape in the event of a second wave of coronavirus (COVID-19) pandemic.

iii.Earlier, the Finance minister (FM) Nirmala Sitharaman announced an fiscal stimulus package under the ‘Atma Nirbhar Bharat Abhiyan’ or ‘Self-Reliant India Movement’ at a modest 10 % of the GDP with a total outlay of Rs 20 lakh crore. However, analysts have pegged it at just 0.8-1.2 % of GDP.

About ICRA Limited:
– Gurugram, Haryana
Non-Executive Chairman and independent director– Arun Duggal
Chief economist– Madan Sabnavis