Indian economy to contract 3.1% in 2020: Moody’s

Moody’s Investors Service on Monday projected the Indian economy to shrink 3.1 per cent in 2020 and said clashes with China on the border also suggest rising geopolitical risks in the Asian region where countries are particularly vulnerable to changes in geopolitical dynamics.

While it pegged India’s annual growth at 0.2 per cent in April, the forecast has been sharply revised after taking into consideration the disruptions due to the Covid-19 pandemic.

However, Moody’s expects the economy to register 6.9 per cent growth in 2021.

In its June update to Global Macro Outlook (2020-21), Moody’s said it had revised down its 2020 growth forecast for India as incoming data show the extent of Covid-related disruption in January

March and April-june quarters.

“April-june quarter of 2020 will go down in history as the worst quarter for the global economy since at least

World War II. We continue to expect a gradual recovery beginning in the second half of the year, but that outcome will depend on whether governments can reopen their economies while also safeguarding public health,” Moody’s said.

The rating agency has forecast that China would be the only G -20 country to post growth this year. The expectation is that China would grow 1 per cent in 2020, followed by a strong rebound of 7.1 per cent in 2021, it added.

According to Moody’s, a rebound in demand would determine the ability of businesses and labour markets to recover from the shock.

Moody’s expect G -20 economies to contract by 4.6 per cent in 2020 as a whole, followed by 5.2 per cent growth in 2021.

Meanwhile, Fitch Ratings said India was likely to come out with another round of fiscal stimulus package, worth about 1% of GDP in the coming months. It said border tension with China may distract India from implementing reforms, but does not impact its credit profile