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CRISIL cuts India's growth forecast to 3.5% from 5.2%
28 Mar '20
2 min read
Pic: Shutterstock
CRISIL has slashed its base-case gross domestic product (GDP) growth forecast for India for fiscal 2020-21 to 3.5 per cent from 5.2 per cent earlier, assuming a normal monsoon and the effect of the COVID-19 pandemic subsiding materially, if not wearing out, in the April-June quarter. The slump in growth will be concentrated in the first half of the next fiscal.
The second half should see a mild recovery, CRISIl said.
The impact of social distancing and decline in discretionary spending will aggravate the downturn in the April-June quarter, and the sharp slowdown in key trading-partner economies will slam exports, CRISIL said on its website.
Services, which now account for 41 per cent of total exports, have been resilient till now, but a recession in the advanced economies would bring down services exports growth, it said.
The ongoing lockdown is bringing manufacturing and services to a grinding halt and disrupting domestic supply chains. As revenue streams of companies get impacted, daily wagers and temporary workers will be in the firing line.
The impact of all this will vary by sector, but services would be hit particularly hard and there is a risk of long-term loss of demand and capacity in both industrial and services sectors, if the crisis prolongs, said the rating agency.
Inflation is likely soften in fiscal 2021, for three reasons: one, the abnormal surge in food inflation in 2019 has started to correct; two, core inflation with remain moderate with slowing growth; and, three, the sharp drop in crude prices will keep fuel inflation soft, it said. With base effect also kicking in, the second half of next fiscal should see a perceptible drop in inflation.
The fiscal package of ₹1.7 lakh crore announced by the government is well designed and targeted and will help cushion the blow on the poorest of poor, CRISIL said.
But more measures are necessary to offset business disruptions, including loan forbearance for small and medium enterprises, and households whose incomes have been materially impacted, impairing their ability to service loans, it added.
The second half should see a mild recovery, CRISIl said.
The impact of social distancing and decline in discretionary spending will aggravate the downturn in the April-June quarter, and the sharp slowdown in key trading-partner economies will slam exports, CRISIL said on its website.
Services, which now account for 41 per cent of total exports, have been resilient till now, but a recession in the advanced economies would bring down services exports growth, it said.
The ongoing lockdown is bringing manufacturing and services to a grinding halt and disrupting domestic supply chains. As revenue streams of companies get impacted, daily wagers and temporary workers will be in the firing line.
The impact of all this will vary by sector, but services would be hit particularly hard and there is a risk of long-term loss of demand and capacity in both industrial and services sectors, if the crisis prolongs, said the rating agency.
Inflation is likely soften in fiscal 2021, for three reasons: one, the abnormal surge in food inflation in 2019 has started to correct; two, core inflation with remain moderate with slowing growth; and, three, the sharp drop in crude prices will keep fuel inflation soft, it said. With base effect also kicking in, the second half of next fiscal should see a perceptible drop in inflation.
The fiscal package of ₹1.7 lakh crore announced by the government is well designed and targeted and will help cushion the blow on the poorest of poor, CRISIL said.
But more measures are necessary to offset business disruptions, including loan forbearance for small and medium enterprises, and households whose incomes have been materially impacted, impairing their ability to service loans, it added.
Fibre2Fashion News Desk (DS)
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