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GDP to contract 5% in India

India people ▼ | May 21, 2020
Domestic rating agency Icra Wednesday warned of a deep recession as it drastically lowered FY21 growth forecast for India to minus 5 per cent, citing the very modest fiscal support.
India people
The agency also sharply revised downwards the growth contraction in Q1 to 25 per cent as against the previous forecast of 16-20 per cent and to minus 2.1 per cent in Q2 from 2.1 per cent growth previously, which implies a recession.

Though the government has been claiming that its economic stimulus package is worth 10 per cent of GDP or Rs 20.9 lakh crore, analysts have pegged it at just 0.8 to 1.2 per cent of the GDP.

But with the lockdown being extended to end-May, and expectation of substantial delays in getting the supply chains operational following the return of millions of migrant workers to their home states, Q1 degrowth will be deeper, and recovery will be shallower and more delayed than our earlier assessment, Icra said.

"Accordingly, we now expect FY21 growth to contract by a whopping 5 percent relative to our earlier expectation of 1-2 percent," its Chief Economist Aditi Nayar and Economist Aarzoo Pahwa said in a note