The report titled ‘Minus nine now’ said the downsides to its earlier forecast had materialised, prompting the revision.
“With the pandemic’s peak not yet in sight and the government not providing adequate direct fiscal support, the downside risks to our earlier forecast have materialised,” the report released on Thursday said.
The agency projected a sharp rise to 10% growth in the coming fiscal, but cautioned this would be partly due to a very weak base and some benefits accruing from the ‘rising-global tide-lifting-all-boats’ effect.
While most other institutions revised their forecasts on account of a higher than expected 23.4% contraction in the April-June quarter, CRISIL had estimated -25% growth for the quarter.
For the second quarter of the fiscal, the report saw growth contracting 12% as most leading indicators were still well below last year’s levels despite sequential improvement through July and August, indicating growth would remain negative.
In real gross domestic product (GDP) terms, CRISIL said the economy would not catch up with FY20 levels until FY22 at least. Beyond this horizon, the report estimated average annual growth at 6.2% for the next three years till FY25.
CRISIL estimated the permanent loss to GDP at 13% or Rs 30 lakh crore. “Catch-up with the pre-pandemic trend value of real GDP would require average real GDP growth to surge to 13% annually for the next three fiscals – a feat never before accomplished by India,” it said.
For the only sector with a positive outlook, the report forecast agriculture to grow at 2.5% during the fiscal. It counted a good monsoon spread and healthy kharif sowing as a tailwind for the sector employing 44% of the population.
While leading indicators such as tractor and two wheeler sales indicated a sharper rural sector demand, the report cited depressed wages, adversely impacted remittances by reverse-migration and by the growing spread of infection as risks to the rural growth story.
Likening the government reforms needed to get the economy on a faster recovery path to ‘biting the bullet first and reap the benefits later’ CRISIL said, “It should stretch itself fiscally to support vulnerable households and small businesses that have been hit hard by pandemic.”