India's economy to contract 11.8% in current fiscal year

[NEW DELHI] India's economy is projected to contract 11.8 per cent on the year in the current fiscal year beginning from April, before bouncing back in the next fiscal year, India Ratings and Research, a domestic arm of ratings agency Fitch, said on Tuesday.

"All indicators, be it mobility or consumption, are pointing towards a much weaker economic recovery," Sunil Kumar Sinha, its principal economist told an online conference.

The economy is projected to contract 11.9 per cent in the current quarter, followed by a contraction of 6.7 per cent in the December quarter and 5.4 per cent in the subsequent quarter, Mr Sinha said, citing the adverse impact of coronavirus pandemic.

Earlier, India Ratings had projected the economy would contract 5.3 per cent in the current fiscal year, versus growth of 4.2 per cent in the previous year.

While a second wave of infections sweeps the globe, India has not yet managed to flatten the first wave, he said.

Its economy shrank 23.9 per cent in the quarter from April to June, much more than forecast, in a sign that recovery could be longer than expected, with analysts urging further stimulus.

On Monday, India surpassed Brazil as the nation with the largest number of infections outside the United States, with a tally of 4.28 million.

India Ratings projected the federal fiscal deficit to rise to 8.2 per cent of GDP, propelled by an economic contraction and greater government spending to mitigate the pandemic effects, versus 4.6 per cent in the previous fiscal year.

REUTERS