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In its latest report, S&P Global Ratings predicted India’s economy to contract 5% in the current fiscal year (FY2021), as the coronavirus pandemic continues to create havoc on the economy, with the nation-wide lockdown still in place.

Key takeaways

“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 (April 2020 to March 2021).”

“Economic activity will face ongoing disruption over the next year as the country transitions to a post-COVID-19 world.”

“Expect growth to pick up to 8.5% in the following fiscal (up from the previous forecast of 7.5%). The GDP is projected to expand by 6.5% in FY23 and 6.6% FY24.”

“COVID-19 has not yet been contained in India. New cases have been averaging more than 6,000 a day over the past week as authorities begin easing stringent lockdown restrictions gradually to prevent economic costs from blowing out further. “

“We currently assume that the outbreak peaks by the third quarter.”

“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.”