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India's GDP growth in FY21 to contract by 4.5%: FICCI
14 Jul '20
3 min read
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The Federation of Indian Chambers of Commerce and Industry’s (FICCI) Economic Outlook survey recently projected the country's annual median gross domestic product (GDP) growth for 2020-21 at minus 4.5 per cent. With the rapid spread of the novel coronavirus, the forecast marks a sharp downward revision from the estimate of 5.5 per cent reported in January, it said.
"The latest round of FICCI's Economic Outlook Survey puts forth an annual median GDP growth forecast for 2020-21 at minus 4.5 per cent—with a minimum and maximum growth estimate of minus 6.4 per cent and 1.5 per cent respectively for 2020-21," the FICCI survey said.
As per the survey, the quarterly median forecasts indicate GDP growth to contract by minus 14.2 per cent in the first quarter of 2020-21, with a minimum estimate of minus 25 per cent and a maximum estimate of minus 7.4 per cent.
Economic activity-wise annual forecast indicated a median growth of 2.7 per cent for agriculture and allied activities for 2020-21.
"Agriculture seems to be the only sector with a silver lining right now. There is an apparent upside as far as the performance of monsoon is concerned this year and the water reservoir levels in the country stand at good levels," the industry chamber said.
According to the survey, the rural sector supported by a steady agriculture performance and hopefully a contained number of COVID-19 cases will be a key demand generator for India this year.
The survey further said that industry and services sector, on the other hand, are expected to contract by 11.4 per cent and 2.8 per cent, respectively in 2020-21.
Weak demand and subdued capacity utilisation rates were already manifesting into a drag on investments and the COVID-19 pandemic has further extended the timeline for recovery, it said.
Even though activity in sectors like consumer durables, FMCG is gaining traction, majority of the companies are still operating at low capacity utilisation rates. Labour availability and feeble demand remain as major issues for the companies, it added.
"Therefore, fresh investments will be difficult to come by in the near to medium term. Also, a significant change in consumption patterns is expected on back of uncertainty with regard to jobs and income losses," FICCI said.
It noted that absence of demand stimulus, a second wave of the pandemic and continuation of social distancing and quarantine measures will weigh heavy on growth prospects.
"With demand and investment outlook muted, robust government expenditure has been the only saviour. Nonetheless, growth is likely to bottom out post the second quarter of current fiscal year," it said.
According to the survery, some of the stimulus measures are reaching to the ground, especially through the credit guarantee scheme, which is positive.
"The latest round of FICCI's Economic Outlook Survey puts forth an annual median GDP growth forecast for 2020-21 at minus 4.5 per cent—with a minimum and maximum growth estimate of minus 6.4 per cent and 1.5 per cent respectively for 2020-21," the FICCI survey said.
As per the survey, the quarterly median forecasts indicate GDP growth to contract by minus 14.2 per cent in the first quarter of 2020-21, with a minimum estimate of minus 25 per cent and a maximum estimate of minus 7.4 per cent.
Economic activity-wise annual forecast indicated a median growth of 2.7 per cent for agriculture and allied activities for 2020-21.
"Agriculture seems to be the only sector with a silver lining right now. There is an apparent upside as far as the performance of monsoon is concerned this year and the water reservoir levels in the country stand at good levels," the industry chamber said.
According to the survey, the rural sector supported by a steady agriculture performance and hopefully a contained number of COVID-19 cases will be a key demand generator for India this year.
The survey further said that industry and services sector, on the other hand, are expected to contract by 11.4 per cent and 2.8 per cent, respectively in 2020-21.
Weak demand and subdued capacity utilisation rates were already manifesting into a drag on investments and the COVID-19 pandemic has further extended the timeline for recovery, it said.
Even though activity in sectors like consumer durables, FMCG is gaining traction, majority of the companies are still operating at low capacity utilisation rates. Labour availability and feeble demand remain as major issues for the companies, it added.
"Therefore, fresh investments will be difficult to come by in the near to medium term. Also, a significant change in consumption patterns is expected on back of uncertainty with regard to jobs and income losses," FICCI said.
It noted that absence of demand stimulus, a second wave of the pandemic and continuation of social distancing and quarantine measures will weigh heavy on growth prospects.
"With demand and investment outlook muted, robust government expenditure has been the only saviour. Nonetheless, growth is likely to bottom out post the second quarter of current fiscal year," it said.
According to the survery, some of the stimulus measures are reaching to the ground, especially through the credit guarantee scheme, which is positive.
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