MOODY'S SEES LONGTERM SCARRING, CUTS INDIA GDP FORECAST TO 9.3%.

RATING FIRM SAYS HIGH DEBT, WEAK FINANCIAL SYSTEM CONSTRAIN SOVEREIGN CREDIT PROFILE

NEW DELHI: Moody's Investors Service on Tuesday slashed India's growth forecast for the current financial year to 9.3% saying that the second wave of coronavirus infections hampers economic recovery and increases risk of longer-term scarring.

Moody's, which has a 'Baa3' rating on India with a negative outlook, said obstacles to economic growth, high debt and weak financial system constrain sovereign credit profile.

The US-based rating agency had in February forecast a 13.7% economic growth for the current fiscal (April 2021-March 2022). As per official estimates, the Indian economy contracted 8% in the previous fiscal ended March 2021.

"India is experiencing a severe second wave of coronavirus infections which will slow the nearterm economic recovery and could weigh on longer-term growth dynamics.

"The surge of the virus, which has been driven by a highly contagious variant, has put significant strain on India's healthcare system with hospitals overrun and medical supplies in short supply," Moody's said.

Stating that the second wave of coronavirus infections hampers economic recovery and increases risk of longer-term scarring, Moody's said the reimposition of lockdown measures will curb economic activity and could dampen market and consumer sentiment.

However, it does not expect the impact to be as severe as during the first wave. Unlike the first wave where lockdowns were applied nationwide for several months, the second wave 'micro-containment zone' measures are more localised, targeted and will likely be of shorter duration.

Nomura cuts FY22 growth estimate to 10.8%

Japanese brokerage Nomura on Tuesday cut its GDP growth estimate for the current 2021-22 fiscal to 10.8% from the earlier 12.6%, blaming the impact of the second wave-induced lockdowns.

It said the activity levels have dropped further to 64.5% of the pre-pandemic levels in the week to May 9 as per a proprietar y index, af ter a further 5 percentage points drop in the week.

The activity levels, at present, are at par with those seen in June 2020.

The countr y has reported over 4 lakh new infections and 4,000 deaths, leading over 20 states to impose lockdowns or lockdown-like restrictions as a desperate measure to restrict the spread of the virus.