Indian economy in deep trouble: S&P

New Delhi: S&P Global Ratings on Friday said Indian economy is in deep trouble with growth expected to contract by 5 per cent this fiscal.

"India's economy is in deep trouble. Difficulties in containing the virus, an anemic policy response, and underlying vulnerabilities, especially across the financial sector, are leading us to expect growth to fall by 5 per cent this fiscal year before rebounding in 2021," S&P said in a report.

In its report titled ''Asia-Pacific losses near $3 trillion as balance sheet recession looms'', S&P projected the region's economy to shrink by 1.3 per cent in 2020, but grow by 6.9 per cent in 2021. This implies a loss nearing $3 trillion output over these two years.

"Asia-Pacific has shown some success in containing Covid-19 and, by and large, responded with effective macroeconomic policies," said Shaun Roache, chief economist for Asia-Pacific at S&P Global Ratings.

"This can help cushion the blow and provide a bridge to the recovery. The recovery looks set to be weighed down by indebted balance sheets, however."

One risk now looming larger is yet another "balance sheet recession" in which at least one important sector of the economy - the government, firms, or households - tries to bolster its weak financial position by saving more, paying down debt, and spending less, S&P said.

"The downturn caused by Covid-19 did not start as a balance-sheet recession but may end up as one," Roache said.