Moody’s Investors Service has forecast India’s real GDP to contract by 11.5 per cent in fiscal 2020-21, much weaker than its previous estimate of a 4.0 per cent contraction. The global rating firm said the collapse in India’s GDP in the first quarter was one of the sharpest among all major G-20 economies.
However, Moody’s said, growth is expected to rebound to 10.6 per cent in 2021-22, reflecting a strong statistical base effect from the low GDP levels of 2020 as economic activity slowly normalises.
India’s real GDP contracted by 23.9 per cent year-on-year in the April-June 2020 quarter, registering the economic impact of the nationwide lockdown measures which were in place from late March till a phased lifting of restrictions began in June. “The collapse in GDP was one of the sharpest among all major G-20 economies,” Moody’s said, adding a rating upgrade is unlikely in the near future.
“However, we would change the outlook on India’s rating to stable if economic developments and policy actions were to raise confidence that real and nominal growth will rise to sustainably higher rates than we project,” ithe rating agency said.
Moody’s said the sharp fall in growth will result in materially weaker government revenue. Combined with increased fiscal expenditure in response to the Covid-19 outbreak, this will contribute to a wider general government fiscal deficit, which Moody’s expects to reach 12.0 per cent of GDP in FY20.
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