ICRA has reexamined its FY21 estimate for the constriction in India's GDP downwards to 11% from its previous projection of 9.5% because of new COVID-19 contaminations staying raised toward the finish of Q2 (July-September) FY21. The credit rating agency cautioned that if the movement of year-on-year (YoY) decrease in Q1 (April-June) FY21 gets updated beneath the underlying assessment, after information for the MSME (miniature, little and medium undertakings) and less conventional parts opens up, the general GDP result for FY21 could be far worse than its desire for an 11% withdrawal.

ICRA added that higher government spending, a faster global recovery, and an early decline in fresh Covid-19 cases could impart an upside to these forecasts. While ICRA expects the economic situation to improve in H2 (October 2020 to March 2021) FY21 relative to H1 (April to September 2020) FY21, it has revised its year-on-year (YoY) forecasts for Q3 (October-December) FY21 (to -5.4% from -2.3%) and Q4 (January-March) FY21 (to -2.5% from +1.3%) relative to its earlier projections. According to Aditi Nayar, Principal Economist, ICRA Ltd, “With the pandemic continuing in India for over six months, we sense that economic agents are now adapting to the crisis, resulting in a graduated recovery to a new post-COVID normal.”

Further, the revenue shock currently being experienced by the Central and the state governments would restrict the degree of financial support that may be forthcoming and result in protracted fears about deferral of both the CAPEX (capital expenditure) and the release of timely payments. Moreover, fresh restrictions being imposed in major trading partners following a new wave of COVID-19 cases could cap the extent of further improvement in exports in the near term.