Crisil said economy may decline by 7.7% in FY21, rating agency termed government’s expenditure as hindrance to development
Rating agency Crisil on Monday revised the country’s GDP growth forecast for this business year. The agency said that the country’s GDP may decline by 7.7 percent in this financial year. Earlier in the estimate, it had said a 9 percent fall in GDP.
The agency also termed the government’s expenditure as a hindrance to the development of the country. The Indian unit of Standard & Poor’s said the second quarter had a better recovery than expected. This pace of recovery continued even during the festive season. This is primarily why the agency revised the GDP estimate. The frequent occurrence of a case of coronavirus infection is also another reason to improve estimates.
The epidemic caused a permanent loss of 12% to GDP.
The agency said that the coronavirus epidemic caused a permanent loss of 12 percent of GDP. Significantly, the Reserve Bank of India (RBI) said earlier this month that GDP could fall by 7.5% in this financial year. RBI had earlier said a 9.5 percent decline. Some other analysts have also improved their estimates.
10% growth rate in FY22
The agency said that due to factors such as the second wave of coronavirus infection, uncertainty related to vaccine availability, fluctuations in global economic recovery due to a new wave of infection, one would need to be cautious. The agency said that FY22 growth could be 10 percent due to a lower base for FY21.
Government can issue further relief package
The agency said that the government may issue more relief packages, as the package released so far has not increased demand. The government’s total relief package, including the monetary steps of the RBI, is a little over 15 percent of GDP, but the government’s direct spending this fiscal year is just 2 percent of GDP. GDP declined 23.9 percent in the first quarter of this financial year and 7.5 percent in the second quarter.
