Indian economy will drop by 10.5 per cent in current FY 2020-21. Two rating agencies have released these figures forecasting a decline in the Indian economy in the current financial year. Fitch Ratings has projected a steep 10.5 per cent drop in the Indian economy in the current financial year 2020-21. On the other hand, India ratings have also forecast an 11.8 per cent decline in GDP.
The data released by the National Statistical Office (NSO) on July 31 has a steep drop in GDP. It was reported that the first quarter (April-June) of the current financial year 2020-21 has a steep drop in GDP by 23.9 per cent. The rating agency Fitch on Tuesday revised India’s gross domestic product (GDP) growth rate to -10.5 per cent for the current financial year. Earlier, Fitch had predicted a five per cent decline in the Indian economy.
Very long and unplanned lockdown has badly affected the Indian Economy
Fitch said that Covid-19 infection is increasing in the country. Due to this, lockdown still put in different parts of the country and this is badly affecting the economy. The 23.9 per cent decline in GDP in the first quarter of the current financial year is one of the highest figures of GDP decline in major economies of the world.
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However, Fitch believes that the economy is opening now and we may see a significant improvement in the July-September quarter. They also said that there are clear signs that the pace of improvement in the economy will remain sluggish and uneven. In the September update on the global economic scenario, Fitch said that most of the recession seen in countries like India, Britain, and Spain. They also said that the lockdown in these countries has been very strict, long, and unplanned.
Small and medium enterprises have many challenges in this corona pandemic
Fitch said that there are many challenges for small and medium enterprise which has stunted growth. Now new cases of coronavirus are increasing and some states and union territories have had to tighten the restrictions again. Due to the continuous outbreak of epidemic and lockdown in the country, the perception has weakened and economic activities have been affected.
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The rating agency said that the income of families and companies was also severely affected due to the steep decline in activities. Financial support has also limited during this period. The quality of financial sector assets has come down. The loan provision amid weak capital buffer of banks. High inflation has put pressure on families incomes and disrupted the supply chain. Prices are rising due to an increase in excise duty. However, the inflation will come down due to weak demand, supply chain bottlenecks, and good monsoon.
Indian economy will grow at 11 per cent in next FY 2021-22
Fitch estimates a 9.6 per cent drop in GDP in the second (July-September) quarter of the current financial year. The economy will come down by 4.8 per cent in the third (October – December) quarter. At the same time, the growth rate of the economy will be 4 per cent in the fourth quarter of January-March. Fitch said that the Indian economy will grow at 11 per cent in the next financial year 2021-22. The economy will grow at a rate of 6 per cent in 2022-23.
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Fitch said that this epidemic is spreading very fast in emerging economies except China. At present, most cases of coronavirus infection are in countries like Brazil, Russia, and India. The Indian economy will register two-digit growth in the next financial year. The main reason for this will be the base effect of the previous financial year. They believe that the Indian economy will not achieve pre-epidemic levels before January-March 2022.