Indian economy to contract 10.5 pc in FY21; COVID-19 spread disrupting eco activity: Fitch
New Delhi: Fitch Ratings on Tuesday slashed India's FY21 growth projection to (-) 10.5 per cent, from (-) 5 per cent estimated earlier, saying the continued spread of the virus and imposition of sporadic shutdowns across the country has disrupted economic activity.
In the first quarter of current fiscal India's gross domestic product (GDP) contracted by a massive 23.9 per cent.
Fitch said India recorded one of the sharpest GDP contractions in the world in the April-June quarter, but noted that growth should rebound strongly in the July-September period amid re-opening of the economy.
However, there are signs that the recovery has been sluggish and uneven, it said.
In its September update of Global Economic Outlook (GEO), Fitch said, the deepest recessions were in India, the UK and Spain, countries that saw particularly large shocks in daily mobility data on visits to retail and recreation venues, and where lockdowns were stringent and long-lasting throughout 2Q20 (April-June).
It said multiple challenges are holding back growth recovery, both in the short and medium term.
"New cases of the coronavirus continue to increase, forcing some states and union territories to re-tighten restrictions... The continued spread of the virus and the imposition of sporadic shutdowns across the country depress sentiment and disrupt economic activity," Fitch said.
It further noted that the severe fall in activity has also damaged household and corporate incomes and balance sheets, amid limited fiscal support.
Also a looming deterioration in asset quality in the financial sector will hold back credit provision amid weak bank capital buffers.
Furthermore, high inflation has added strains to household income and supply-chain disruption and excise duties increases have caused prices to rise. It projected inflation to slow amid weak underlying demand, easing supply-chain disruption and a good monsoon.
"We have slashed our GDP forecast for this fiscal year to - 10.5 per cent, a huge revision of - 5pp (percentage points) compared to the June GEO. We expect the shortfall of activity relative to our pre-virus forecast to be 16 per cent by early 2022," Fitch said.
GDP growth is likely to be (-) 9.6 per cent in July-September, (-) 4.8 per cent in October-December and 4 per cent in January-March quarter this fiscal, as per Fitch projections.
For the next fiscal, Fitch estimated Indian economy to grow 11 per cent, while for 2022-21 growth would be 6 per cent.
Separately, India Ratings and Research, the India arm of Fitch Ratings, on Tuesday revised India's GDP growth forecast to (-) 11.8 per cent, from (-) 5.3 per cent earlier.
Fitch said the pandemic has become more prevalent in emerging market countries excluding China as the year has progressed. Brazil, Russia and India now have some of the highest coronavirus caseloads in the world.
"India imposed one of the most stringent lockdowns worldwide in 2Q20 and domestic demand fell massively. Limited fiscal support, fragilities in the financial system, and a continued rise in virus cases hamper a rapid normalisation in activity.
"The double-digit growth rate we expect for 2021-2022 simply reflects the low base in 2020 we do not expect GDP to return to pre-virus levels until 1Q22 (January-March. 2022)," Fitch said.
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Karnataka Lokayukta to register case, probe Bowring wall collapse
Bengaluru (PTI): Karnataka Lokayukta Justice B S Patil on Thursday took serious note of the compound wall collapse at Bowring and Lady Curzon Hospital in the city that killed seven people, and announced registration of a case on its own while warning of action against officials found responsible.
The Lokayukta, who visited the site and conducted an inspection, expressed strong displeasure over the incident and questioned the inaction of authorities, even as police and emergency teams had earlier rushed to the spot to rescue victims trapped under the debris following heavy rain, strong winds and a hailstorm on Wednesday evening.
“I will now register a suo motu case. This is not just about this one incident — such incidents must not occur anywhere in the state or the city in the future,” Justice Patil told reporters.
Seven people, including a six-year-old girl, were killed and seven others injured when the compound wall collapsed as rain-battered victims had taken shelter near it, according to police. The victims included people from Kerala who were in the city on a study tour.
Calling for systemic accountability, the Lokayukta said, “Dilapidated buildings and weakened compound walls, especially in areas with public access, must first be identified. They must either be repaired, demolished, or rebuilt.”
He added that responsibility would be fixed on officials of the BBMP and the concerned departments.
Justice Patil said that hearings would be conducted and preventive action initiated, while also probing those responsible for it, how the incident could have been prevented, and why it was not prevented.
A Scene of Crime Officers (SOCO) team and a Forensic Science Laboratory (FSL) team also inspected the site, while police cordoned off Kovil Street to facilitate the probe.
Deputy Chief Minister D K Shivakumar said the government had initiated measures following the rain-related incidents and stressed preparedness.
“Since last night we have initiated measures regarding the rains. When it rains heavily, we must be prepared, and we are working towards that,” he told reporters here.
On the wall collapse, Shivakumar said, “I will not directly blame any officials. It was an old wall, and trees had grown alongside it. Due to that pressure, it collapsed.”
The Deputy CM said instructions had been issued to identify such vulnerable structures and clear areas around them, including relocating street vendors.
Karnataka Medical Education Minister Sharan Prakash Patil said a technical assessment had been ordered.
“This is a very serious matter. Innocent people have been affected. We are issuing directions to the engineers to find out why this compound wall collapsed and to assess its structural strength,” he told reporters after inspecting the spot.
The Minister noted that the wall was ‘very old’ and required thorough examination to prevent recurrence.
Speaking to reporters, Congress president Mallikarjun Kharge asked the Karnataka government to take precautions to ensure that incidents like the collapse of the Bengaluru government hospital compound wall, which caused loss of life, should not repeat.
Meanwhile, addressing a press conference, Shivajinagar MLA Rizwan Arshad said the collapse raised questions about construction and maintenance practices.
“If a wall collapses within 25 years of its construction, it needs to be examined -- whether there was any technical issue, or if anything was altered inside, weakening it. All this can only come out through a technical investigation,” he said.
The Congress MLA also called for wider structural audits across the city, stating that all such structures, whether private or government, must be audited.
He urged citizens to support victims, saying it was a collective responsibility in times of crisis.
