Rating firm Crisil has revised its real GDP forecast for India in fiscal 2021 to a contraction of 9 per cent from 5 per cent fall projected in May, and estimated a permanent loss of 13 per cent of real GDP over the medium term, which amounts to Rs 30 lakh crore in nominal terms.
With the pandemic’s peak not yet in sight and the government not providing adequate direct fiscal support, the downside risks to the earlier forecast have materialised, it said. “If the pandemic were to peak out in September-October, GDP growth could move into mildly positive territory towards the end of this fiscal,” it said, adding even in that event, manufacturing is expected to revive faster compared with services. “But the risks to our outlook remain tilted to the downside till such time a vaccine is found and mass produced.”
“We expect a permanent loss of 13 per cent of real GDP over the medium term. In nominal terms, this amounts to Rs 30 lakh crore. This is much higher than a 3.0% permanent hit to GDP in Asia-Pacific economies (ex-China and India) over the medium run estimated by S&P Global in June,” the rating agency said.
Catch-up with the pre-pandemic trend value of real GDP would require average real GDP growth to surge to 13 per cent annually for the next three fiscals — a feat never before accomplished by India. The overall caseload of Covid still remains concentrated in states which have a major share in India’s GDP: Maharashtra, Tamil Nadu, Karnataka and Andhra Pradesh together account for 54 per cent of India’s total confirmed cases as on September 7, and 36 per cent of India’s GDP, it added.
Crisil said high-frequency indicators, both conventional and unconventional (such as Google’s Community Mobility Reports), correlate reasonably well with GDP estimates. In the April-June quarter, GDP contracted 23.9 per cent (against its forecast of 25 per cent), but that did not come as a surprise as these indicators were indicating a deep hit.
But thereafter, till August end, they showed recovery from April levels, yet remained below pre-pandemic levels, implying the economic contraction continued, albeit less severely than in the first quarter, the agency said.
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