India's GDP likely to contract 4.5% in FY21: FICCI survey

India's GDP likely to contract 4.5% in FY21: FICCI survey

Industry body FICCI's latest Economic Outlook Survey has pegged India's growth for 2020-21 at (-) 4.5 per cent as the country continues to see a gradual rise in financial stress.

Data shows that while overall growth estimates stand at -4.5 per cent, the GDP estimated for the first quarter of the year is abysmal at(-) 14.2 per cent. The official growth numbers for the first quarter are expected to be released by the end of August 2020.

FICCI puts India's minimum growth estimate at (-) 6.4% and maximum growth at 1.5% for the year 2020-21.

The Indian economy was already reeling under economic pressure when the lockdown was announced at the end of March. It may be noted that the Covid-19 lockdown has sharply accelerated economic stress in the country.

The current round of the survey was conducted in the month of June 2020 and drew responses from leading economists representing industry, banking, and financial services sector.

Agriculture seems to be the only sector with a silver lining right now. FICCI’s economic outlook survey observed that there is an upside as far as the performance of monsoon is concerned this year and the water reservoir levels in the country stand at good levels.

Since the lockdown was announced, the government focused on agriculture. Government's focus has been on bridging the existing gaps while creating potential for new opportunities. In the Rs 20 lakh crore economic relief package, the government tried to address marketing, infrastructure, supply chain, livestock disease management, rural livelihood issues.

Economic activity wise annual forecast indicated a median growth of 2.7 per cent for agriculture and allied activities in 2020-21.

Meanwhile, one of the biggest casualties of the virus has been the industry and service sector, with travel. food and beverage industry expected to contract by 11.4 per cent and 2.8 per cent respectively in 2020-21.

Weak demand and subdued capacity utilisation rates were already manifesting into a drag on investments and the Covid-19 pandemic has further extended the timeline for recovery, noted the survey.

Even though activity in sectors like consumer durables, FMCG etc. is gaining traction, majority of the companies are still operating at low capacity. Labour availability and feeble demand remain as major issues for the companies.

Therefore, fresh investments will be difficult to come by in the near-to-medium term. Also, a significant change in consumption patterns is expected on back of uncertainty with regard to jobs and income losses.

Expenditure on non-essential goods is likely to remain under check for some time. In fact, the share of private final consumption expenditure in GDP has already reported a decline from 59.9 per cent in Q3 FY20 to 55.9 per cent in Q4 FY20.