Moody’s cuts GDP forecast to 9.3% from 13.7% in FY22

NEW DELHI: Moody’s Investors Service on Tuesday slashed India’s growth forecast for the current financial year to 9.3% noting that the second wave of Covid hampers economic recovery and increases risk of longer-term scarring.
Moody’s, which has a ‘Baa3’ rating on India with a negative outlook, said obstacles to economic growth, high debt and weak financial system contrain sovereign credit profile.The US-based rating agency had in February forecast a 13.7% economic growth for FY22. According to official estimates, the Indian economy contracted 8% in the previous fiscal ended March 2021.
Moody’s said the reimposition of lockdown measures will curb economic activity and could dampen market and consumer sentiment. However, it does not expect the impact to be as severe as during the first wave.
“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. The credit profile of India is increasingly constrained by obstacles to economic growth, a high debt burden and weak financial system. Policymaking institutions have struggled to tackle and contain these risks, exacerbated by the pandemic,” it added.
It said mutually reinforcing risks from deeper stresses in the economy and financial system could lead to a more severe and prolonged erosion in fiscal strength, exerting further pressure on the credit profile.