New Delhi: Ratings agency ICRA on Tuesday predicted that India’s economy is likely to witness a sharp contraction of 4.5 per cent during Q4 FY 2020 and is expected to gradually recover to post a GDP growth of just 2 percent in FY2021. Also Read - Budget impact on infra marginally positive: ICRA

ICRA has sharply cut its forecast for Indian GDP growth in FY 2021, post the Covid-19 outbreak. Also Read - IL&FS crisis: Ratings of 6 MF schemes under Icra scanner



“Amid uncertainty as to when the situation will normalize, we expect a sharp downturn in various indicators of the manufacturing and services sectors from March 2020 onwards,” said Shamsher Dewan, Vice President and Sector Head, Corporate Ratings, ICRA.

“This primarily includes the discretionary activities like travel, tourism and hospitality; labour intensive sectors like construction, transport and manufacturing of non-essential items; exports; and supporting sectors like electricity.”



According to Dewan, the silver lining amid the grim scenario will be the expected healthy outlook for the rabi crop which would provide some support through improved rural demand.

“Higher government spending would also cushion the extent of the slowdown to an extent,” he said.

The Covid-19 outbreak which started in China in December 2019 has morphed into a global pandemic, affecting 203 countries, over one million people and increasing rapidly – European countries, North America and Asia being severely impacted.