India's gross domestic product (GDP) could contract by one per cent in financial year 2020-21 due to extension of the nationwide lockdown, says rating agency ICRA. The cut in GDP projection came after India extended the nationwide lockdown till May 3 in an effort to contain the spread of COVID-19.
This is the first forecast that indicates that Indian GDP growth could fall into a negative territory.
"With the fluidity of the situation thwarting precise forecasts, ICRA currently projects Indian GDP to contract in a range of 10-15 per cent in Q1 FY21, which would translate to a bleak full year growth band of +/-1 per cent in FY21," Aditi Nayar, Principal Economist, ICRA, said.
"The size of the GDP shrinkage would be contingent on the extent to which a graded resumption in activities is permitted in some areas post April 20, and the magnitude by which government spending is stepped up to cushion the blow from the lockdown," Nayar added.
Last month, ICRA had projected the economy to grow at 2 per cent in FY21, citing that nationwide lockdown has weakened momentum in the industry. "The Indian economy is likely to witness a sharp contraction of 4.5 per cent (de-growth) during Q4 FY20 and is expected to recover gradually, to post a GDP growth of just 2 per cent in FY21," the rating agency said.
Earlier today, Barclays also cut India's calendar year (CY) 2020 GDP growth forecast to zero per cent from 2.5 per cent earlier and 0.8 per cent for FY21 from 3.5 per cent earlier. The brokerage also lowered its CY21 GDP growth forecast to 7.5 per cent from 8 per cent, previously. The brokerage estimated the economic loss will be close to $234.4 billion (8.1 per cent of GDP), assuming the country remains under a partial lockdown at least until the end of May.
In an address to the nation, Prime Minister Narendra Modi on Tuesday announced that the nationwide lockdown will be extended till May 3. India is under complete lockdown since March 25 to check the spread of coronavirus.
By Chitranjan Kumar