India’s economy to contract to 9% in the fiscal year 2021: S&P

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Recently, the S&P (it is basically a stock market index), in its global rating mentioned that it is expecting that India’s economy will shift by 9% in the fiscal year which ends on March 31, 2021. Fiscal year can be defined as a one-year tenure which is used by the government and companies for reporting the financial year and budgeting about it. Due to the adversity of the Covid 19 pandemic which the country is facing, it highlighted that the contraction will be more than the previous contraction estimate which was expected to be 5%.

After the 23.9% contraction faced by the economy in April-June, due to the strict lockdown in the country which led to collapse of exports, consumer spending capacity and also private investment, several banks and rating agencies have made a forecast about deep cuts which the Indian economy will face. 

Three months after S & P made projections on India’s real GDP for the fiscal year 2021, S&P has added this latest revision. In its note the S&P mentioned that while the lockdown has eased since June, however, the pandemic will continue to obstruct economic activities. It highlighted that with the spread of the virus which is uncontained, consumers will be more careful while spending or going out and a pressure on the firms. 

Vishrut Rana who is the Asia-Pacific economist for S&P Global Ratings pointed out that the fact that there is possible inflation concern in India, is cutting the potential for possible money support. So far, the Reserve Bank of India, has cut its policy rates by 110 points. 

S&P further added that the high deficit of India will limit its fiscal stimulus, further. Fiscal stimulus basically means to increase the government consumption or to transfer and lower taxes. 

Recently, Moody said that it expects that India’s GDP will contract by 11.5% in fiscal 2020.

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