FY 2021 GDP May Contract 11.8 Per Cent: India Ratings

Rating agency, India ratings has revised its ratings for the country further downwards to 11.8 per cent in FY 2021.

The quantum of negative gross domestic product (GDP) growth of 23.9% recorded in 1QFY21 is much higher than India Ratings and Research's (Ind-Ra) forecast of 17.0%, because of the impact of the COVID-19 pandemic and resultant lockdown.

The agency has, therefore, revised its FY21 GDP growth forecast further downward to negative 11.8% from negative 5.3%. The negative 23.9% growth in 1QFY21 is the first contraction in quarterly GDP data series which have been made available in the public domain since 1QFY98. The economic loss in FY21 is estimated to be INR18.44 trillion. However, GDP is expected to rebound and grow at 9.9% yoy in FY22 mainly due to the weak base of FY21.

"All indicators, be it mobility or consumption, are pointing towards a much weaker economic recovery. Out of 35 states/union territories (UTs), workplace mobility improved only in 16 states/UTs between end-May and end-August 2020. As the number of COVID -19 infections picked up significantly across India in July, leading to local/regional lockdowns, mobility in many states/UTs reduced by end-August from end-June.

As human mobility is closely linked with economic activity, even GSDP weighted workplace mobility depicts a similar trend as the workplace mobility. After a pickup in June to 70.0% of baseline, it declined to 68.5% in July. However, the August (70.3%) data again shows a pickup. Ind-Ra believes the work place mobility would remain low even in the next few months and would not return to normal till a vaccine is found," India Ratings has said.