Moody’s Expecting 11.5% Contraction in India’s GDP In FY21


India’s GDP In FY21, rating agency Moody’s projecting an 11.5% contraction in India’s gross domestic product (GDP) in the current fiscal year because of the COVID-19 pandemic, they had estimated (-) 4 percent earlier.

During the April-June quarter, the Indian economy shrank 29.9 percent, due to coronavirus disruptions. Moody’s said that the Indian credit profile is increasingly constrained by its low growth, high debt load, and a weak financial system. They also added that the country’s institution responsible for policymaking has struggled to mitigate and contain the risks exacerbated by the coronavirus pandemic.

Risks from deeper stresses in the Indian financial system, the financial system can result in fiscal power erosion, stated Moody’s.

“Mutually reinforcing the risks from deeper stresses within the economic system and financial system may result in an extra extreme and extended erosion in fiscal strength, exerting additional strain on the credit score profile,” Moody’s mentioned.

Nevertheless, Moody’s expects India’s financial progress to rebound to 10.6% within the subsequent fiscal year (FY22) on a robust base impact.

Other global rating agencies and the research firms have slashed their GDP progress estimates for India in FY21. Whereas Fitch Ratings are expecting the nation’s gross domestic product (GDP) to contract by 10.5 % current fiscal year versus their earlier estimate of a 5 % contraction, India’s Ratings expects an 11.8 % contraction now versus a 5.3 % contraction, which was forecasted earlier.

Fitch mentioned in their Global Economic Outlook (GEO) that Indian GDP should rebound strongly in the third quarter of 2020 (October-December) amid the re-opening of the economy activity, but there is sign of sluggish and uneven recovery.

In one other report, Morgan Stanley, a rating agency, projected a contraction of 5% within the Indian financial system in the calendar year 2020 from 4.9% in the year 2019. The financial system will, however, bounce to 9.5% progress in 2021, it mentioned, predicting that a V-shaped recovery within the international financial system was playing out faster than initially thought.

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