Moody’s cuts India growth forecast for 2021 to 9.6%
NEW DELHI: Moody’s Investors Service on Wednesday slashed India’s growth projection to 9.6% for 2021 calendar year, from its earlier estimate of 13.9%, and said faster vaccination progress will be paramount in restricting economic losses to June quarter
In its report titled Macroeconomics—India: Economic shocks from second Covid wave will not be as severe as last year’s, Moody’s said high-frequency economic indicators show that the second wave of Covid-19 infections hit India’s economy in April and May. With states now easing restrictions, economic activity in May is likely to signify the trough. “The virus resurgence adds uncertainty to India’s growth forecast for 2021; however, it is likely that the economic damage will remain restricted to the April-June quarter. We currently expect India’s real GDP to grow at 9.6% in 2021 and 7% in 2022,” Moody’s said.
Earlier this month, Moody’s had projected India to clock a 9.3% growth in the current fiscal ending March 2022, but a severe second Covid wave has increased risks to India’s credit profile and rated entities.
Stating that stringent lockdowns in economically significant states will mar April-June quarter economic activity, Moody’s said the 10 states that have been hardest hit by the second wave collectively account for more than 60%of the prepandemic level of India’s GDP. Four states—Maharashtra, Tamil Nadu, Uttar Pradesh and Karnataka—contributed the largest shares among all states in financial year 2019-20.
Moody’s said faster vaccination progress will be paramount in restricting economic losses to the current quarter. As of the third week in June, only about 16% of the population had received one vaccine dose; of those, only about 3.6% had been fully vaccinated.
“Mobility and economic activity will likely accelerate in the second half of the year as the pace of vaccinations pick up. The government recently announced a strategy to centralise vaccine procurement in order to boost vaccinations, which if successful, will support the economic recovery,” it added.
Moody’s expects the overall hit to India’s economy to be softer than that during the first wave last year.