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Indian economy may see full-year contraction due to coronavirus crisis, says report

The economy may contract in FY21 as the probability of recovery from the ongoing disruptions remains "clouded", according to the DBS Bank report

twitter-logoBusinessToday.In | June 1, 2020 | Updated 14:11 IST
Indian economy may see full-year contraction due to coronavirus crisis, says report
India has been under lockdown since March 25

The Indian economy is expected to see negative full-year growth even as partial reopening of coronavirus lockdown is underway, a report said. The economy may contract in FY21 as the probability of recovery from the ongoing disruptions remains "clouded", according to the DBS Bank report. It comes as India's gross domestic product (GDP) grew at just 3.1 per cent in the quarter ended March of FY20. GDP grew at the slowest rate since the global financial crisis more than a decade back.

"Headline growth was firmer than consensus, but was constrained by data collection issues, including unavailability of earnings for many sectors. This keeps the door open for downward revision to this growth rate," DBS Bank India economist Radhika Rao said in the report. The April-June quarter is expected to provide a clearer picture of the impact of coronavirus lockdown, the report said. Consumer discretionary sectors, production, and services are expected to take longer to recover, it noted.

"Drivers of agricultural output will be watched closely as much hope rests on the sector to provide a counterbalancing effect, especially monsoon strength, as kharif sowing will get underway," DBS Bank said.

"As the country goes to a post-pandemic situation, among all the priorities we have, health recovery will be very important. Risks of a second wave should be monitored closely, as regional experience attests, which can potentially not only extend movement restrictions but also carry significant economic impact," it added.

Meanwhile, overall growth for FY20 slumped to 4.2 per cent, lowest since FY09 when GDP was 3.09 per cent, compared to 6.1 percent in FY19, the Central Statistics Office (CSO) said. The GDP numbers announced by the government are in consonance with the expectations of many economists and experts on account of the economic slowdown in the pre-coronavirus period. The data also gave a glimpse into the impact of coronavirus lockdown on the economy which began in the last week of March.

Also read: Lockdown 5.0: Fifth phase of coronavirus lockdown from June 1, all you need to know about unlock 1.0

Also read: CBDT notifies Income Tax Return forms for FY 2020-21; check details here

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