The Confederation of Indian Industry (CII) has said the country's GDP could even shrink 0.9 per cent in case the outbreak extends and spreads further, "leading to prolonged restrictions in existing hotspots and identification of new hotspots".
In its report, titled "A Plan For Economic Recovery", the CII has pegged economic expansion between a negative 0.9 per cent (contraction) and 1.5 per cent based on three scenarios: "optimistic" (1.5 per cent growth), "base" and "downside risk" (0.9 per cent contraction).
"Given the extent of damage to the economy from disruption to business, the GDP growth in FY21 is likely to be the lowest in many decades," said Director General Chandrajit Banerjee while releasing a paper with three scenarios.
Industry body CII has called for a "sharp but temporary stimulus", which can be withdrawn once the economy is back on track. "Without such a step, the budget will continue to bleed for several years, as the revenue shortfall continues."
Credit ratings major Fitch on Thursday brought down its growth forecast for the country to 0.8 per cent in the fiscal year ending March 2021, from an earlier projection of 2 per cent mere three weeks ago, and compared to an estimated 4.9 per cent growth in the previous year. It, however, does expect growth to rebound to 6.7 per cent in 2021-22.
The ratings agency has predicted two consecutive quarters of contraction or negative year-on-year growth in current fiscal year -- (-)0.2 per cent in April-June and (-)0.1 per cent in July-September. This compares to 4.4 per cent estimated growth in January-March. By definition, two consecutive quarters of negative GDP growth are known as recession.
"World GDP is now expected to fall by 3.9 per cent in 2020, a recession of unprecedented depth in the post-war period," said Brian Coulton, Chief Economist at Fitch Ratings.
The projections - aimed at estimating the severity of the economic fallout from the deadly COVID-19 disease and the lockdowns - are in sharp contrast to the figures just before March, highlighting the severity of the outbreak.
Many economists believe the measures announced by the government and the RBI fall short of the support needed to aid the country's fight against the pandemic. The government has announced a spending package of Rs 1.7 lakh crore, and the central bank has cut key interest rates, and brought in targeted long-term repo operations to ease liquidity in the system.
Meanwhile, the country's economy is likely to suffer its worst quarter since the mid-1990s, hit by the ongoing lockdown imposed to stem the spread of coronavirus, according to a poll by news agency Reuters. Official data for the fourth quarter of 2019-20, which ended on March 31, 2020, will be released by the end of May.
