India’s gross domestic product (GDP) forecast for the current financial year 2021-22 has been significantly slashed by rating agency Moody’s to 9.3 per cent from its earlier projection of 13.7 percent.
The latest cut in projections come in the wake of a severe health crisis nationwide, brought on by the second wave of the pandemic.
All About Moody’s
Moody’s Investors Service, often referred to as Moody’s, is the bond credit rating business of Moody’s Corporation, representing the company’s traditional line of business and its historical name.
Reason for decrease in forecast
This is due to the ratings agency believing that the quality of India’s growth has also declined, alongside a marked slowdown in the rate of economic expansion in recent years.
Also, it has pointed out that India’s credit profile is increasingly constrained by obstacles to economic growth.
FY-23 Forecast
Moody’s has raised its forecast for real GDP in FY23 to 7.9 percent as compared to 6.2 percent earlier. The long term real GDP growth has been pegged at about 6 percent.
Govt deficit and Inflation
The general govt fiscal deficit has been estimated at 11.8 percent of GDP in FY22, up from the 10.8 percent forecast earlier.Inflation has been estimated at 4.8 percent in FY22, and at 4 percent in FY23.
Comment from company
“India is experiencing a severe second wave of coronavirus infections which will slow the near-term 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,”
“As of now, we expect the negative impact on economic output to be limited to the April-June quarter, followed by a strong rebound in the second half of the year.”
“As a result of the negative impact of the second wave, we have revised our real, inflation-adjusted GDP growth forecast down to 9.3 per cent from 13.7 per cent for fiscal 2021 and to 7.9 per cent from 6.2 per cent in fiscal 2022.”
Similar Forecast
Last week, another US-based rating agency S&P last week said India’s GDP growth rate could drop to 9.8 per cent under the ‘moderate’ scenario, where Covid infections peak in May.
Fitch projected a 12.8 per cent recovery in GDP in the fiscal year ending March 2022, moderating to 5.8 per cent in FY23.
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