India Ratings and Research on Thursday narrowed the contraction in India's FY21 gross domestic product (GDP) growth to negative 7.8 percent from a negative 11.8 percent. Accordingly, the ratings agency pointed out the easing of the Covid-19 headwinds and better-than-expected 2QFY21 GDP numbers as the reasons behind such a move.

"However, the question remains, how sustainable is the recovery witnessed in 2QFY21, as a significant part of the impetus came from the festival and pent-up demand," the ratings agency said in a report. "Although the headwinds emanating from Covid-19 related challenges are unlikely to go away till mass vaccination becomes a reality, perhaps the economic agents and economic activities not only have learnt to live with it but also are adjusting swiftly to the post-Covid-19 world," the report said.

The Ratings agency expects FY22 growth to be 9.6 percent, mainly due to the weak base of FY21.