Moody’s pegs India’s GDP growth for FY22 at 9.3%
Indian economy would rebound in the current fiscal ending March 2022 and clock a growth of 9.3%, but a severe second Covid-19 wave has increased risks to India’s credit profile and rated entities, Moody’s Investors Service said on Tuesday.
Moody’s, which has a ‘Baa3’ rating on India with a negative outlook, said it expects a decline in economic activity in the June quarter due to reimposition of lockdown measures along with behavioural changes on fear of contagion.
“India’s economy rebounded quickly from a steep contraction in 2020, but a severe second wave of the coronavirus has increased risks to the outlook with potential longer-term credit implications. Risks to India’s credit profile, including a persistent slowdown in growth, weak government finances and rising financial sector risks, have been exacerbated by the shock,” Moody’s said.
In an ‘FAQ on the coronavirus
State Bank of India economists on Tuesday sharply slashed their FY22 GDP growth estimates to 7.9%—the lowest among all analysts— from the earlier projection of 10.4% growth.
They, however, said that at ₹145.8 lakh crore, the real GDP for FY22 will be “slightly higher” than those in FY20, and called it a ‘W-shaped’ recovery with two troughs and not the earlier anticipated ‘V-shaped’ recovery.
second wave and the sovereign’s medium-term credit challenges’, the rating agency said the pandemic will leave new economic scars and deepen prepandemic constraints and GDP growth would average around 6% in the longer term.
“We expect a decline in economic activity in the April-june quarter, followed by a rebound, resulting in real, inflation-adjusted GDP growth of 9.3% in the fiscal year ending March 2022 (fiscal 2021) and 7.9% in fiscal 2022,” it said, adding that the impact from potential subsequent waves remain a risk to its forecasts.
Moody’s had in February forecast a 13.7% growth in current fiscal.
The Indian economy contracted by 7.3% in fiscal 2020-21 as the country battled the first wave of Covid, as against a 4 per cent growth in 2019-20.
It said the government’s ability to limit the spread of the virus and materially increase the rate of vaccinations will have a direct impact on the trajectory of both health and economic outcomes.
India began the third phase of its vaccination campaign for those aged 18-44 on May 1, making vaccines available to the entire adult population. However, as of late May only around 15% of the country’s population had received at least one dose of the vaccine, Moody’s said.