Indian Economy likely to contract by 4.5% in Q4FY2020: ICRA

The deadly COVID-19 pandemic has pushed the world economy in deep peril. The novel coronavirus, which originated in the Chinese city of Wuhan last December, has put economies in an uncertain territory, out of which they now have to navigate.

On Tuesday, ratings agency ICRA ( Investment Information and Credit Rating Agency ) predicted that India’s economy may face a sharp contraction of 4.5 per cent during Q4FY2020. The agency also said this situation is expected to gradually recover to post a GDP growth of just 2 percent in FY2021.

Following the coronavirus outbreak, ICRA sharply cut its forecast for Indian GDP (gross domestic product) growth in fiscal year 2021.

"Amid uncertainty as to when the situation will normalize, we expect a sharp downturn in various indicators of the manufacturing and services sectors from March 2020 onwards," said Shamsher Dewan, Vice President and Sector Head, Corporate Ratings, ICRA.

"This primarily includes the discretionary activities like travel, tourism and hospitality; labour intensive sectors like construction, transport and manufacturing of non-essential items; exports; and supporting sectors like electricity."

The silver lining amid this grim situation, as per Dewan, will be the expected healthy outlook for the rabi crop which would provide some support through improved rural demand.

"Higher government spending would also cushion the extent of the slowdown to an extent," he said.

The COVID19 pandemic has affected 203 countries, infecting more than 14,00,000 people across the globe. In India, more than 5,000 people have been infected so far and this figure is likely to go up in the coming days.

In a bid to contain the spread of the virus, Prime Minister Narendra Modi had ordered a 21-day nationwide lockdown. Other countries across the globe are observing similar lockdowns, because of which businesses have taken a major hit.

An end to the ongoing pandemic is nowhere in sight even as the world unites to battle it.