Coronavirus impact: India's GDP may contract 6% in FY21, says Citi

India's gross domestic product (GDP) growth is expected to contract 6 per cent in financial year 2020-21 amid rising coronavirus cases, a brokerage said. The revision by Citigroup is mainly owing to a cut to the fiscal first-quarter forecast, with the economy seen falling 21 per cent during the period compared to 16 per cent estimated earlier. In its last projection the global brokerage had said that the GDP may see a 3.5 per cent decline.

Citigroup also said that the business sentiment will remain on a lower note in Q2 of the running fiscal. It's only in the third quarter that the economic activity may return to the pre-coronavirus level. However, sustained growth rate may still take a longer time, it added.

Earlier today, the Finance Ministry said that India's GDP may contract 4.5 per cent in fiscal 2020-21 in line with the global growth slowdown due to coronavirus lockdown. The projection was 6.4 percentage points lower than what the government had estimated in April this year.

Meanwhile, according to the June forecast of the International Monetary Fund (IMF), the Indian economy is set to contract by 4.5 per cent in 2020 following a longer period of lockdown and slower recovery. The IMF's latest forecast for India is in line with other forecasts that project Asia's third-largest economy to contract between 4 per cent and 5 per cent in 2020.

"First-quarter GDP was generally worse than expected (the few exceptions include, for example, Chile, China, India, Malaysia, and Thailand, among emerging markets, and Australia, Germany, and Japan, among advanced economies). High-frequency indicators point to a more severe contraction in the second quarter, except in China, where most of the country had reopened by early April." the IMF's World Economic Outlook for June said.

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