Benefiting from favourable moisture conditions, seasonally high reservoir levels and returnee labourers, at least in some parts of the country, ICRA expects agricultural gross value addition to rise by 3.5 to 4 per cent in the current financial year FY21.
However, the unabated rise in Covid-19 infections in unlock phase has resulted in localised reimposition of lockdowns in several states, which has interrupted overall economic recovery in recent weeks.
For instance, data on electricity consumption signals a mild worsening in the pace of contraction to 4.9 per cent for the week ending July 13 from 3.7 per cent for the week ending July 6.
Moreover, some production facilities have had to halt operations temporarily, given a spurt of Covid-19 infections among their workers.
ICRA said many sectors seemed to be adjusting to a new normal as the economy started to recover from the troughs experienced in April when the lockdown was at its severest.
The available data up to June provided some broadly encouraging cues of a gradual, yet uneven recovery across different sectors relative to the levels in April.
For instance, from a situation of virtually no production in April, the output of passenger vehicles, scooters and motorcycles resumed in May and recorded a year-on-year de-growth of 57.7 per cent, 74.2 per cent and 42.4 per cent respectively in June.
"We also anticipate more unevenness as different regions move in and out of lockdowns, and persisting labour supply mismatches affect supply chains and consumption patterns," said ICRA's Principal Economist Aditi Nayar.
"Additionally, the timeline for a firmer recovery out of the contractionary phase is now being pushed ahead to at least Q4 FY21 from Q3 FY21. This presumes that a vaccine will be widely available by then which now appears necessary for discretionary consumption to recover in certain sectors such as travel, hospitality and recreation."
ICRA has thus tempered its expectations regarding the extent of fiscal support that may be forthcoming, given the revenue shock being experienced by various levels of governments.