COVID 19 Impact: India’s FY21 Forecast Revised To 4.6 Per Cent By Fitch Solutions

New Delhi: With the rising cases of coronavirus within the country, Fitch Solutions has revised India’s FY2020–21 (April–March) real GDP growth forecast to 4.6 per cent, from 5.4 per cent previously.

“We highlight that risks to our FY2020/21 forecast remains tilted to the downside. We now expect private consumption to come under pressure and also investments to register a full-year contraction. That said, a higher net exports contribution, due to a sharper imports’ contraction versus exports and higher government consumption will aid to cushion the blow,” states Fitch Solutions in its report on Monday.

India is the world’s second most densely inhabited nation with a population of 130 crore. 

The report further stated, “A weak healthcare system, with already stretched medical facilities, will also inhibit India’s ability to ‘flatten the infection curve’, which informs our view for a sharp negative impact to the economy over H1FY2020/21 at least. As such, we expect the outbreak to worsen significantly over the coming months. 

India has called for a minimum 21-day lockdown of its economy since March 25, aimed to arrest the spread of the deadly virus. All individuals, with the exception of those working in essential services identified by the government such as public administration, traders dealing in daily necessities, medical staff, and manufacturers of essential medical products, effectively face a ban on leaving their homes during the period. India has also closed its land borders and suspended all visa issuances, with the exception of diplomatic, employment, and project visas till April 15.

The Indian government has announced various measures to contain the economic impact.

“Despite the announced measures, we continue to expect private consumption growth to come under strong headwinds over the coming months. We have revised our private consumption growth forecast to 3 per cent, from 4.5 per cent previously, putting it far below the 7 per cent average over the past decade. Movement restrictions due to the lockdown as well as job, and thereby income, losses, will also inhibit an increase in private consumption for many over the coming months,” the report states.

“This has already had a disproportionately impact on the poor working in the cities, forcing many workers to return home to the rural areas. While the government’s direct cash transfers should ideally help ease the financial burden for many of the poor, we highlight implementation challenges, which would hamper the stimulus’ effectiveness. Direct cash transfers to the bank accounts present some challenges,” the report adds.