Covid-19 to cripple economy: CRISIL cuts FY21 India growth forecast to 5.2%

Bank of America Securities lowered India growth forecast to 4.1 per cent for FY21 on Thursday

The Covid-19 pandemic will leave the Indian economy crippled next fiscal pulling down the growth to a low of 5.2 per cent, warns CRISIL that had earlier forecast the GDP printing in a 5.7 per cent expansion.

However, the late Thursday evening forecast from CRISIL is much higher than those from some other analysts.

For instance, the house economists at Bank of America Securities lowered India growth forecast to 4.1 per cent for FY2021 on Thursday, just a day after slashing their forecast by 80 bps to 5.1 per cent on Wednesday.

Noting that the faster spreading of the pandemic having hit more than 155 nations--has cast a long shadow over a much-anticipated mild recovery in the domestic economy in FY21, with the WHO declaring it a pandemic, the agency said it is slashing its forecast by 50 bps to 5.2 per cent as the longer Covid-driven shutdowns will further roil the already weak economy.

Noting that external risks to global growth has increased significantly now, the CRISIL report quotes its parent S&P's forecast of a recession in the US and in the Eurozone, and a record low growth in China which is seen crashing to 2.9 per cent now, almost half of what it had said on March 5 when it has pegged the same at 4.8 per cent.

"Some per cent, from 5.7 per cent said recently, it said and warned that downside hit to domestic consumption demand is likely due to the social distancing, though it is too early for that to reflect in data. Currently, the other downside to growth is also due to the financial sector stress now percolating to private sector banks.

In view of this, we cut our base-case GDP growth forecast for fiscal 2021 to 5.2risks are more to this forecast.

A serious downside to our base case can emerge if the pandemic is not contained by April-June globally, and makes the global slowdown more severe; and if it spreads rapidly in the country, affecting domestic consumption, investment, and production, they warned.



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