Indian economy is most likely to contract 5 percent in the current fiscal as the nationwide lockdown imposed to curb the spread of COVID-19 pandemic has curtailed economic activity severely.
“We have lowered our growth forecast for fiscal year ending March 2021 to a 5 per cent contraction… We currently assume that the outbreak peaks by the third quarter,” said S&P in a statement.
Earlier this week, rating agencies namely Fitch and Crisil too had predicted a 5 percent contraction for the Indian economy.
“The COVID-19 outbreak in India and two months of lockdown, longer in some areas, have led to a sudden stop in the economy. That means growth will contract sharply this fiscal year. Economic activity will face ongoing disruption over the next year as the country transitions to a post-COVID-19 world,” S&P said in a statement.
New cases of Covid-19 have been averaging over 6,000 a day over the past week as authorities have started easing stringent lockdown restrictions gradually to check economic costs from blowing out further.
“We believe economic activity in these places will take longer to normalize. This will have knock-on impacts on countrywide supply chains, which will slow the overall recovery… We expect varying degrees of containment measures and economic resumption across India during this transition,” S&P said.