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India’s FY21 GDP now expected to contract by 7.8%, will turn positive by 4QFY21: Ind-Ra

“However, the question remains, how sustainable is the recovery witnessed in 2QFY21, as a significant part of the impetus came from the festival and pent-up demand,” the ratings agency said in report

India Ratings and Research on Thursday narrowed the contraction in India's FY21 gross domestic product (GDP) growth to negative 7.8 per cent from a negative 11.8 per cent.

Accordingly, the ratings agency pointed out the easing of the COVID-19 headwinds and better-than-expected 2QFY21 GDP numbers as the reasons behind such a move.

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"However, the question remains, how sustainable is the recovery witnessed in 2QFY21, as a significant part of the impetus came from the festival and pent-up demand," the ratings agency said in a report.

"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," the report further said.

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According to Ind-Ra, GDP growth during 3QFY21 is expected to come in at negative 0.8 per cent and 4QFY21 GDP growth to turn positive at 0.3 per cent as against its earlier expectation it turning positive in 4QFY22.

Besides, the agency expects FY22 growth to be 9.6 per cent, mainly due to the favourable or weak base of FY21.

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