Ratings agency Crisil revised upwards its FY21 GDP contraction estimate to 7.7% from the earlier expectation of 9%, and termed lower government spending as a "constraint" for growth. The agency, which is a unit of Standard & Poor's, said a faster than expected revival in the economic activity in the second quarter, which continued in the festival season, is the prime reason for the upward revision in its estimate. It said pandemic, which has pushed the economy into contraction mode, will result in a permanent loss of 12% in real GDP terms.

After its initial expectation of 9.5% GDP contraction in FY21, the RBI revised up its estimate to 7.5% earlier this month. Other analysts have also revised upwards their projections as the unlocking of economy led to higher activities. "A faster-than-expected revival in activity in the second quarter, which continues into the festive season, is one of the reasons for the revision.

The consistent decline in the overall Covid-19 caseload is the other," the research wing of the rating agency said. It said "inadequate fiscal spending" remains a "constraint" for economic growth, and pointed out a possible second wave of COVID afflictions, uncertainty regarding the availability of the vaccine, and hiccups in global economic revival due to resurgence of cases as factors which call for caution.

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