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CRISIL projects slower contraction at -7.7% for India in FY21 against -9% in September


Rating agency CRISIL has projected a slower contraction of 7.7% for the Indian economy in the ongoing fiscal, compared to the 9% forecast in September on the back of “faster-than-expected” recovery in the second quarter, but called for more fiscal measures to sustain it.

The agency expects the growth to bounce back to 10% in FY22 led by a very weak base and global rising tide effect, but added that the permanent loss to the economy would be 12% in real GDP terms.

“Our forecast for fiscal 2021, thus remains predicated on the pandemic’s trajectory and importantly, what the government does to stimulate a well-rounded recovery in the coming months,” CRISIL said in a report released on Monday.

The second quarter print of -7.5% prompted a calibration of the S&P Group firm’s previous estimate, which was based on the assumption of -12% growth in the July-September quarter.

“Pent up demand, support from agriculture and select export sectors, and cost savings for corporates, engineered this recovery,” the report said.

The period since official data was released on the second quarter performance saw a number of institutions raising their growth expectations for India. Most recently Fitch Ratings upped its FY21 forecast to -9.4% from -10.5% earlier while the Asian Development Bank projected -8% growth this fiscal for India against -9% before.

Fiscal spending

CRISIL emphasised that the direct fiscal spending component of the government’s existing stimulus package was inadequate to galvanise demand and it expected further support soon.

“Direct government spending to boost demand in the current fiscal remains inadequate given the massive hit to the economy. Our outlook assumes that the central government will raise direct spending in the coming months to support the economy,” the report said.

Third quarter

For the ongoing fiscal, the agency estimates growth at -1% as high-frequency indicators showed a moderation in the pace of recovery in November as compared to October’s high.

Indicators like the Purchasing Managers’ Index, goods and services e-way bill collections, power demand and electronic toll collection have all slowed down in November against the previous month, it said.


Inflation has continued to surprise on the upside despite easing of lockdown restrictions, with both food and core inflation contributing to the rising trend, CRISIL said, raising its estimate of CPI inflation to 6.4% in FY21 from 5.6% earlier.

CRISIL noted that the inflationary trend would hit the poor the most and reduce disposable incomes, apart from raising economic uncertainty and limiting the central bank’s policy space.


Extraordinary monetary support along with a continued accommodative stance from the Reserve Bank of India resulted in financial conditions going from their tightest in a decade in March to the easiest in the past three years as of date, the report said.

This resulted in a strong revival in capital inflows, much to the benefit of the Indian equity market, but there was some way to go until the easing reaches the broader economy, it said.

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