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GDP contraction estimate increased to 9.5%
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SME Times News Bureau | 17 Jul, 2020
Rating agency ICRA has revised
downwards its forecast of India's 2020-21 GDP contraction to 9.5 per
cent from an earlier estimate of 5 per cent.
The rating agency
cited the climbing Covid-19 infections resulting in a spate of localised
lockdowns in some states and cities as the reason for the sharp
downward revision.
It said that these localised lockdowns are arresting the nascent recovery that had set in during May-June 2020.
"The
Indian economy had started to recover from the troughs experienced in
April 2020, when the lockdown was at its severest, and many sectors
seemed to be adjusting to a new normal. However, the unabated rise in
Covid-19 infections in the unlock phase and re-imposition of localised
lockdowns in several states, appear to have interrupted this recovery,"
Aditi Nayar, Principal Economist, ICRA said in a statement.
"Given
the severity of the pandemic and the duration of the safety measures
that need to be employed, we now expect a deeper pace of GDP contraction
in Q2 FY2021 relative to our earlier forecast. We also anticipate more
unevenness, as different regions move in and out of lockdowns, and
persisting labour supply mismatches affecting supply chains and
consumption patterns."
According to Nayar, timeline for a firmer
recovery out of the contraction phase is now being pushed ahead to at
least Q4 FY2021 from Q3 FY2021.
"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," she added.
Besides, ICRA expects the Indian economy to have contracted by a sharp 25 per cent in Q1 FY2021.
Given
the aforesaid concerns, the ratings agency now expects a shallower
recovery in the subsequent quarters, with a contraction of 12.4 per cent
in Q2 FY2021 and a milder 2.3 per cent in Q3, followed by an anaemic
growth of 1.3 per cent in Q4.
On the positive side, the rating agency expects the rural economy to partly counter the slowdown in the urban economy.
It
remains optimistic regarding the outlook for agricultural growth and
rural consumption, as it benefits from favourable moisture conditions,
seasonally high reservoir levels, and returnee labourers at least in
some parts of the country.
"The recovery in tractor sales in May
2020 suggests that rural consumer confidence was relatively insulated
during the lockdown. Moreover, the reverse migration of a large portion
of migrant workers back to the rural areas, suggests a shift in where
consumption will take place at the bottom of the pyramid," Nayar opined.
However, the rating agency has tempered its expectations
regarding the extent of fiscal support that may be forthcoming, given
the revenue shock being experienced by various levels of governments.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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