India Ratings and Research (Ind-Ra) recently revised its expectation for India’s gross domestic product (GDP) growth for fiscal 2020-21 to minus 7.8 per cent from minus 11.8 per cent due to the easing of the COVID-19 headwinds and better-than-expected second quarter (Q2) GDP numbers. A significant part of the impetus, however, came from the festival and pent-up demand.

Although the headwinds emanating from COVID-19 related challenges are unlikely to go away till mass vaccination becomes a reality, perhaps the economic agents and economic activities not only have learnt to live with it but also are adjusting swiftly to the post COVID-19 world, Ind-Ra said in a press release.

The rating agency now expects the third quarter GDP growth to come in at minus 0.8 per cent and the fourth quarter GDP growth to turn positive at 0.3 per cent as against its earlier expectation of it turning positive in the fourth quarter of fiscal 2021-22.

It expects fiscal 2021-22 growth to be 9.6 per cent, mainly due to the favourable and weak base of the current fiscal.

Agriculture has been a bright spot even through the lockdown and continues to be so, riding on the back of the favourable 2020 monsoon. Ind-Ra, therefore, expects agriculture, industry and services to grow at 3.5 per cent, minus 10.3 per cent and minus 9.8 per cent year on year (YoY) respectively in the current fiscal.

The agency expects private final consumption expenditure and gross fixed capital formation to fall by 13.4 per cent and 16.8% yoy, respectively, in FY21.

Of the other two demand-side growth drivers, while government expenditure is expected to grow at just 3.3% YoY due to significant expenditure compression, exports could fall 7.9 per cent YoY in this fiscal due to a combination of the ongoing trade conflict and COVID-19 pandemic, increasing the uncertainty in the global economy. Government expenditure declined by 22.2 per cent YoY.