Crisil cuts FY21 growth estimate sharply to 3.5 pc

Mumbai, Mar 26 () The severe dent in the economic activity due to the coronavirus pandemic led rating agency Crisil to sharply cut its growth estimate for 2020-21 to 3.5 per cent, on Thursday.

Earlier, the agency had predicted an economic growth of 5.2 per cent for the next financial year.

The agency welcomed the Rs 1.70-lakh crore package announced by Finance Minister Nirmala Sitharaman earlier in the day but said more measures like loan forbearances for small businesses and households are necessary.

The country has been placed in a 21-day lockdown since Wednesday as authorities try to restrict the spread of coronavirus and minimise the number of infected cases. Currently, 13 people have succumbed to the virus and over 650 infected.Advertisement

"The pandemic in India and the consequent lockdown for 21 days pose a material risk to our India economic outlook. The adverse effects that will follow can dwarf the gains from the sharp drop in crude oil prices, and the anticipated monetary and fiscal stimuli," it said.

The agency said the pandemic's cost is not only restricted to financial one like the post-Lehman Brothers crisis of 2008, but it also involves enormous human suffering that has not been witnessed in decades.

Crisil Chief Economist Dharmakirti Joshi said the estimate of 3.5 per cent growth in 2020-21 assumes a normal monsoon and also a subsidising of the pandemic's economic impact in the June quarter.
Advertisement

"The slump in growth will be concentrated in the first half of the next fiscal, while the second half should see a mild recovery," he said.

Social distancing and discretionary spends will be hit in the June quarter, it said adding that sluggish growth in advance economies will also hit Indian exports. Even though services, which account for 41 per cent of the total exports, have been resilient so far, the impact in advance economies will hit indian IT and tourism sectors and dent export earnings, it said.Advertisement

The ongoing lockdown is affecting manufacturing activity and also services and, in turn, affecting the domestic supply chains, the agency said adding that daily wage earners will be in the firing line.

"The non-linearity and complexity of what's unfolding creates uncertainties not only for businesses but for all mankind, and weighs heavily on sentiment and outlook, with risks tilted to the downside. Inability to control the pandemic and extension of the lockdown will aggravate supply and demand shocks," Crisil Chief Executive and Managing Director Ashu Suyash said.

She also conceded that this is the reason why it is hard to quantify the downside at the present moment.Advertisement

On inflation, it said even though there can be a spike in the near term because of panic buying, price rise will eventually soften in the next financial year.

A slew of analysts have been cutting their growth estimates in the light of the coronavirus impact, with some reports also saying that there will be a shrinking of the economy in the first quarter of the next financial year when the impact of the virus will be the highest.

In a report earlier in the day, Singaporean bank DBS cut its 2020-21 growth forecast to 4 per cent. AA HRS
{{}}

(This story has not been edited by Business Insider and is auto-generated from a syndicated feed we subscribe to.)