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India’s stringent lockdown norms have lasted longer than expected, said Fitch Ratings as it further reduced India’s GDP forecast to (-) 5 per cent from an earlier projected growth of 0.8 per cent for the current fiscal.

However, for 2021-22 the economic growth forecast has been pegged at 9.5 per cent.

The massive cut was revealed in the latest Global Economic Outlook’s Crisis Update, which has been prepared in response to coronavirus-related lockdown extensions and incoming data flows.

“The biggest forecast cut was to India where we now anticipate a 5 per cent decline in the current financial year (ending March 2021) in contrast to an earlier forecast of growth of 0.8 per cent,” the update report said.

“India has had a very stringent lockdown policy that has lasted a lot longer than initially expected and incoming economic activity data have been spectacularly weak.”

As per the update, Fitch also expects output in emerging markets (EM) excluding China to fall by 4.5 per cent this year compared to a predicted fall of 1.9 per cent before.

“This large revision reflects the deterioration in the health crisis in many of the largest emerging markets (EMs) over the past month or so, including in Brazil, India and Russia,” the update said.

Besides, Fitch’s GEO said the return to economic normality is likely to be a slow and bumpy process.

“An aggressive resurgence of the virus that necessitated greatly extended nationwide lockdowns would lead to an even worse outcome,” the GEO update report said.

India’s fourth recession since Independence, first since liberalisation, and perhaps the worst to date is here, according to rating agency, Crisil.

The Indian economy shrinking 5 per cent in fiscal 2021 (on-year), because of the Covid-19 pandemic. The first quarter will suffer a staggering 25 per cent contraction. About 10 per cent of gross domestic product (GDP) in real terms could be permanently lost. “So going back to the growth rates seen before the pandemic is unlikely in the next three fiscals”, Crisil said.

The agency has revised its earlier forecast downwards. “Earlier, on April 28, we had slashed our prediction to 1.8 per cent growth from 3.5 per cent growth. Things have only gone downhill since”, it said.

While we expect non-agricultural GDP to contract 6 per cent, agriculture could cushion the blow by growing at 2.5 per cent.

In the past 69 years, India has seen a recession only thrice as per available data in fiscals 1958, 1966 and 1980. The reason was the same each time a monsoon shock that hit agriculture, then a sizeable part of the economy.

“The recession staring at us today is different,” it added. For one, agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. Two, the pandemic-induced lockdowns have affected most non-agriculture sectors. And three, the global disruption has upended whatever opportunities India had on the exports front.

Economic conditions have slid precipitously since the April-end forecast of 1.8 per cent GDP growth for fiscal 2021 (baseline), Crisil said.

Agencies