Crisil has cut India’s base-case gross domestic product (GDP) growth forecast for fiscal 2020-21 to 5.2 per cent from 5.7 per cent. The new assessment factors in the huge uncertainty because of COVID-19, with risks to the forecast tilted downwards. The forecast will be reassessed continuously as new information comes in.
A serious downside to the rating agency’s base case can emerge from two developments. One, the pandemic is not contained by April-June 2020 globally, and makes the global slowdown more severe. And two, it spreads rapidly in India, affecting domestic consumption, investment, and production. These would further hurt confidence and the financial markets, CRISIL said in a press release.
In any case, India has little policy firepower to give a meaningful push to growth, and the pandemic is making it more difficult. While there will be steeper deceleration in global growth and India’s trade, what is unclear is the extent of impact on economy through domestic channels of production (supply) and consumption (demand).
The answer would depend largely on the extent of spread within India. So far, India is among the Asian economies that aren’t deeply impacted