Indian economy to contract by 9% in current fiscal: S&P

New Delhi, September 14

S&P Global Ratings on Monday slashed its FY21 growth forecast for India to (-) 9%, from (-) 5% estimated earlier, saying that rising Covid cases would keep private spending and investment lower for longer.

Weaker recovery in informal sectors to blame

• Earlier, the rating agency had forecast 5% contraction for the Indian economy in the current fiscal
• It said rising Covid cases in India will keep private spending and investment lower for longer
• It said risks to the growth outlook include a weaker recovery in informal sectors of the economy and deeper economic losses for micro and small enterprises

“One factor holding back private economic activity is the continued escalation of the Covid,” S&P Global Ratings Asia-Pacific economist Vishrut Rana said.

Rising Covid cases in India will keep private spending and investment lower for longer. S&P Global Ratings now expects the country’s economy to contract by 9% in the current fiscal year, which ends March 31, 2021, the US-based rating agency said. For 2021-22 fiscal, it expects economic growth at 10%.

It said risks to the growth outlook include a weaker recovery in informal sectors of the economy and deeper economic losses for micro and small enterprises.

“In addition, if credit quality worsens materially following the expiration of loan moratoriums, the recovery will slow. One factor that presents potential upside to growth is the availability of a widely-distributed Covid vaccine earlier than our current estimate around mid-2021,” S&P added.

It said the 23.9% contraction in the April-June quarter was larger than expected.

“While India eased lockdowns in June, we believe the pandemic will continue to restrain economic activity. New cases per day in India averaged nearly 90,000 in the week ending September 11, according to data from the World Health Organisation.

Last week, two other global rating agencies Moody’s and Fitch projected Indian economy to contract 11.5% and 10.5%, respectively, in the current fiscal. However, Goldman Sachs has estimated the contraction at 14.8%. — PTI