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India’s GDP to contract by 5.3% in FY21, bounce back in FY22: Ind-Ra

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India's GDP to contract by 5In accordance with the India Ratings and Research (Ind-Ra), India’s Gross domestic Product (GDP) is likely to shrink by 5.3% in FY20-21, the lowest GDP growth in the Indian history. It will contract in each quarter in FY21 (April 2020 to March 2021). For FY21-22, it is expected that GDP growth would bounce back in the range of 5-6%.

Key Points with regard to FY21:

-Private final consumption expenditure (PFCE) will contract by 5.1%.

-Gross fixed capital formation (GFCF) will contract 17.6%.

-Merchandise exports to decline 9.4%.

-Merchandise imports are expected to decline 17.4%.

-Trade deficit is estimated to decline to a four-year low of USD 97.7 billion (3.9 per cent of GDP) and current account deficit to USD 3.3 billion (0.1 per cent of GDP).

-Agricultural gross value added (GVA) is expected to grow 3.5%.

-The retail and wholesale inflation to come in at 3.6% and 1.2%, respectively, in FY21.

-Fiscal deficit of the central government in FY21 is expected to more than double (7.6% of GDP) the budgeted amount (3.5% of GDP). 

Reason behind this downfall:

The reason behind the downfall of Indian Economy in FY21 is COVID-19 pandemic which has disrupted the production, breakdown of supply chains/trade channels and total wash out of activities in aviation (some activities have started now), tourism, hotels and hospitality sectors. 

Point to be noted:

This will be the lowest GDP growth in the Indian history (Indian GDP data is available from FY51) and sixth instance of economic contraction, others being in FY58, FY66, FY67, FY73 and FY80; the previous low was negative 5.2% in FY80.

About Ind-Ra:
It is a 100% owned subsidiary of the Fitch Group.
Chief Executive Officer (CEO) & Managing Director (MD)– Rohit Karan Sawhney
Headquarter– Mumbai, Maharashtra