On September 14, 2020, S&P (Standard & Poors) Global Ratings projected a contraction of 9% in India’s gross domestic product (GDP) in FY21 in comparison to previous estimate of 5% contraction. The reason behind this down gradation is rising coronavirus cases in India that are keeping private spending and investment lower for a longer-than-anticipated period.
- In accordance with the World Health Organization (WHO) data, new cases per day in India averaged nearly 90,000 in the week ended Sept 11, 2020, an increase from an average of about 70,000 per day in August, 2020.
- As long as the virus spread remains uncontained, consumers will be cautious in going out and spending will be under strain.
-India’s economy shrank 23.9% year-on-year in the Q1FY21, the steepest decline among G-20 countries.
-The private consumption is lowered by 26.7% while fixed investment sunk by 47.1% due to pandemic induced lockdown. However, higher welfare spending prevented an even sharper fall in growth.
–Agriculture is the only major sector to expand due to the favorable monsoon season.
-Due to lower relative output in industrial activity the growth for the September quarter (Q2FY21) will be negative.
-While fiscal spending increased during the March–June quarter, the targeted fiscal stimulus measures announced so far amounts to about 1.2% of GDP. This magnitude is lower compared with global averages.
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To state “2020-21 Resolution of the Monetary Policy Committee (MPC)” a three day meeting of Reserve Bank of India’s (RBI) six-member MPC, headed by Shaktikanta Das was held from August 4-6, 2020 where it was forecasted that India’s real gross domestic product (GDP) will contract in the first half (H1) of FY21 as well as full FY 2020-21 in view of rising inflation and declining of economic growth amid the gradual lifting of COVID-19) countrywide lockdown.
About S&P (Standard & Poors) Global Ratings:
President– John Berisford
Headquarters– New York, New York, United States