MOODY’S EXPECTS INDIA TO GROW BY 13.7% NEXT YEAR

The Indian economy is expected to grow 13.7 per cent in the financial year 2021-22 (FY22), registering a strong rebound from a 7 per cent contraction this fiscal year, said Moody’s on Thursday, adding the country’s fiscal position would remain weak in 2021, posing a key credit challenge.

Moody’s had in November last year projected the economy to contract 10.6 per cent in FY21 and return to growth of 10.8 per cent in FY22.

The upgrade in growth forecast comes on the back of normalisation of activity and growing confidence in the market with the rollout of Covid-19 vaccine.

On fiscal consolidation, the global rating agency said the prospects remain weak, particularly given the government’s mixed track record of implementing revenue-raising measures.

Meanwhile, ICRA, Moody's Indian affiliate, said it expects a considerable rebound in India's economic growth in FY22 on the back of higher central government spending, and a pick-up, albeit uneven, in consumption.

Overall, ICRA projects real GDP to grow 10.5 per cent in FY22 and nominal GDP to expand 14.5 per cent as the pandemic recedes.

Moody's said the central government's fiscal deficit for FY21 and FY22 should be lower than projected. This is on the back of stronger revenue generation in the fourth quarter of FY21 and higher nominal GDP growth in FY22.

"Still, wide fiscal deficits combined with lower real and nominal GDP growth over the medium term will constrain the government's ability to reduce its debt burden," said Gene Fang, an associate managing director at Moody's.