India at the brink of a worst recession since Independence; CRISIL sees FY21 GDP to contract 5%

CRISIL says, "The recession staring at us today is different."

May 27, 2020 05:05 IST India Infoline News Service

The country since Independence has faced three recessions and looks like the fourth one would be a soon-to-be reality if the Coronavirus pandemic continues to rise rapidly impacting businesses and economy.

In its note, CRISIL says, "The recession staring at us today is different."

CRISIL points out, in the past  69 years, India has seen a recession only thrice – as per available data – in fiscals 1958, 1966 and 1980. In these each period of recession, reason has been the same - a monsoon shock that hit agriculture, then a sizeable part of the economy.

Explaining why a fourth recession is at the brink, CRISIL said, "For one, agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. Two, the pandemic-induced lockdowns have affected most non-agriculture sectors. And three, the global disruption has upended whatever opportunities India had on the exports front."

The rating agency believes India Gross Domestic Product (GDP) to suffer a staggering 25% contraction during the first quarter of FY21.

CRISIL has estimated India’s GDP growth to fall off a cliff and contract 5% in fiscal 2021. Earlier, the agency has cut down prediction to 1.8% growth from 3.5% growth. Adding it says, "Things have only gone downhill since."

While CRISIL expects non-agricultural GDP to contract 6%, agriculture could cushion the blow by growing at 2.5%.

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