However, it will be lower than 4 per cent growth recorded in 2019-20.
Although the headwinds emanating from the COVID-19-related challenges are unlikely to go away till mass vaccination becomes a reality, the rating agency said it expects GDP growth to turn positive in 4QFY21 (January-March) and FY22 GDP to come in at 9.6 per cent.
"The AE of 2020-21 reflect continued resurgence in economic activity in Q3 and Q4 - which would enable the Indian economy to end the year with a contraction of 7.7 percent", it said in a statement.The real GVA (Gross Value Added) is expected to shrink 7.2 per cent in FY21 after 3.9 per cent growth in FY19, while nominal GDP is expected to contract 4.2 per cent as against 7.2 per cent in FY20 (budgeted 10 per cent in Feb 2020).
"We assess that the government may revise upwards its borrowing target so as to exceed 7 per cent of 2020-21 nominal GDP and signal a move towards restoring fiscal consolidation in a limited way in the budget estimates for 2021-22", he said.
As per the GDP estimates, all sectors are expected to post a contraction for the full fiscal, except agriculture. The manufacturing sector is likely to see a contraction 9.4% compared to a reading of 0.03% in the previous fiscal.
The real GDP at 2011-12 prices in 2020-21 has been estimated to contract 7.7 percent and nominal GDP at current prices by 4.2 per cent.
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Hard-pressed for funds to combat the COVID-19 crisis, the government had in May increased its market borrowing programme for the current financial year by more than 50 per cent to Rs 12 lakh crore.
The GVA at basic prices for 2019-20 from electricity, gas, water supply and other utility services sector is expected to grow by 2.7 per cent.
The agriculture sector has been the only silver lining this fiscal year with the manufacturing sector also registering a partial recovery in the second half of the fiscal year anticipating festival season demand.
According to the International Monetary Fund (IMF), India's economy is projected to contract by 10.3 per cent this year and likely to bounce back with an impressive expansion of 8.8 per cent next year.
Issuing the state, the ministry said that the lockdown and restrictions imposed in the current fiscal has affected the economy. Experts feel that the GDP advance estimates depict H2 growth pick up led by services and government spending.
As per ANAROCK research, the first three quarters of FY21 (April to December) saw total residential sales of 93,150 units across the top 7 cities in which festive period (Oct. -Dec.) alone comprised 55 percent share. "The relatively more manageable pandemic situation in the country as compared to advanced nations has further added momentum to the economic recovery".