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Indian GDP may contract by 5-6% in Q1 FY21: Acuite Ratings
10 Apr '20
2 min read
Pic: Shutterstock
There is a risk of a contraction of India’s gross domestic product (GDP) to the extent of 5-6 per cent in the first quarter of fiscal 2020-21, with the second also likely to post a modest growth in a best case scenario, according to projections by Acuité Ratings, which expects the overall GDP growth for this fiscal to be in the band of 2-3 per cent.
This takes into account a significant economic revival in the second half of this fiscal.
The economy is expected to lose around $4.64 billion every day during the lockdown and almost around $100 billion during the 21-day mandatory lockdown period.
The heavily affected services are transport, hotel and restaurants, and real estate that account for around 22 per cent in gross value added (GVA). The rating agency is expecting around 50 per cent loss in these sectors in the first quarter of this fiscal.
Agricultural sector that accounts for 15 per cent of GVA will be relatively less affected as crop harvesting and food distribution activities will continue; however, livestock and fishery segments will witness a mute demand and lower the sector’s average 3.5-4 per cent growth, the company said in a press release.
Even if the pan India shutdown is lifted by the middle of April, the disruption in economic activities is likely to continue well through the first quarter.
The impact of the lockdown is also fairly severe on industrial activity, which is set to witness significant contraction except in the pharmaceutical, gas and electricity and medical devices.
The only sector that is expected to be relatively least impacted on a relative basis is the agricultural sector and allied activities. This sector that accounts for 15 per cent of GVA is expected to see continuing activity with respect to crop harvesting, warehousing and distribution even in the lockdown period although the lockdown and the lack of availability of labour may have some impact.
The rating agency believes it would take at least two to three months to restore the industry supply chain completely in the domestic market even if the lockdown is limited to 21 days.
This takes into account a significant economic revival in the second half of this fiscal.
The economy is expected to lose around $4.64 billion every day during the lockdown and almost around $100 billion during the 21-day mandatory lockdown period.
The heavily affected services are transport, hotel and restaurants, and real estate that account for around 22 per cent in gross value added (GVA). The rating agency is expecting around 50 per cent loss in these sectors in the first quarter of this fiscal.
Agricultural sector that accounts for 15 per cent of GVA will be relatively less affected as crop harvesting and food distribution activities will continue; however, livestock and fishery segments will witness a mute demand and lower the sector’s average 3.5-4 per cent growth, the company said in a press release.
Even if the pan India shutdown is lifted by the middle of April, the disruption in economic activities is likely to continue well through the first quarter.
The impact of the lockdown is also fairly severe on industrial activity, which is set to witness significant contraction except in the pharmaceutical, gas and electricity and medical devices.
The only sector that is expected to be relatively least impacted on a relative basis is the agricultural sector and allied activities. This sector that accounts for 15 per cent of GVA is expected to see continuing activity with respect to crop harvesting, warehousing and distribution even in the lockdown period although the lockdown and the lack of availability of labour may have some impact.
The rating agency believes it would take at least two to three months to restore the industry supply chain completely in the domestic market even if the lockdown is limited to 21 days.
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