ICRA pegs GDP contraction at 10-15% in Q1 amid lockdown extension

With lockdown extended till May 3, rating agency ICRA has projected India’s gross domestic product (GDP) to contract 10-15 per cent in the first quarter of 2020-21, which would be unprecedented in the post-Independent history of the country.
 

Earlier, ICRA had expected GDP to fall by 4.5 per cent in the first quarter when lockdown was for 21 days till April 14.
 

India’s economy grew by 5.6 per cent in the first quarter of 2019-20 and 7.1 per cent in the corresponding period of FY19.

The new projections by ICRA would mean that the economy would grow or fall in the range of 1 per cent in the entire 2020-21. India's economy was officially estimated to grow by 5 per cent in FY20, but these figures are unlikely to be met when actual data comes in. The economy grew 6.1 per cent in 2018-19.

ICRA Chief Economist Aditi Nayar said it would be difficult for the labour intensive sectors to bounce back quickly now with most migrant labour out of cities.  “With the continuing spread of the Covid-19 warranting an extension in the lockdown for most activities, we expect the contraction in GDP in Q1 FY21 to be more pronounced than our earlier forecasts,” she said.
 

The size of the GDP shrinkage would be contingent on the extent to which a graded resumption in activities is permitted in some areas post-April 20 and the magnitude by which government spending is stepped up to cushion the blow from the lockdown.

ICRA also put a caveat that the fluidity of the situation is thwarting precise forecasts.