“As a result, besides contracting for the whole year, GDP will contract in each quarter in FY21. However, the agency believes the GDP growth
would bounce back in the range of 5 per cent-6 per cent in FY22, aided by the base effect and return of gradual normalcy in the domestic as well as global economy.”
The estimate for FY22 is much lower than what other forecasts say. Some estimates expect the low-base effect to push GDP growth
for FY22 to as high as 8-9 per cent. Separately, the government still expects that growth will bounce back in the second half of FY21, though it agrees with the Reserve Bank of India’s statement that GDP will contract this year.
“The credit and liquidity enhancing measures announced in the government’s economic package in combination with some of the earlier steps announced by the RBI will certainly address the supply-side issues of the economy. The Indian economy even before the COVID-19 related lockdown was suffering on the demand were floundering,” the agency said.
“The lockdown and its impact on economy and livelihoods only aggravated the sagging consumption demand. Ind-Ra believes the government is aware of it; but, the near absence of demand-side measures in the economic package indicates the hard budget constraint facing the government,” it said.
The agency also said that the fiscal deficit of the central government in FY21 is expected to more than double to 7.6 per cent of GDP from the budgeted estimate of 3.5 per cent of GDP. The majority of the fiscal slippage will be from the revenue side, it said.