Moody's sees 7% contraction in India this fiscal, 13.7% growth in next

04 Mar '21

2 min read

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India’s economy is expected to witness a growth of 13.7 per cent in fiscal 2021-22, registering a strong rebound from a 7 per cent contraction this fiscal on the back of normalisation of activity and growing confidence in the market with the rollout of COVID-19 vaccine, according to Moody's Investors Service, which had in November last year projected a 10.6 per cent contraction in this fiscal.

The economy would return to growth of 10.8 per cent in fiscal 2021-22, the rating agency had predicted last year.

"For the year following that we expect a rebound of 13.7 per cent that reflects largely normalisation of activity, a pronounced base effect. Recovery of activity reinforced by some degree of rollout of vaccine, and growing confidence in market that things are getting more back to normal," Moody''s Investors Service associate managing director (sovereign risk) Gene Fang said in an online conference organised by Moody's and its India affiliate ICRA on India Credit Outlook 2021.

Fang said reform implementation remains a challenge in India, and expressed uncertainty over revenue generation through CPSE privatisation announced in the Budget saying such "one-off monetisation policies are less durable in terms of supporting fiscal health for long term," a news agency reported.

Stating that recession in India has ended, ICRA principal eonomist Aditi Nayar said Indian economy could clock a 0.3 per cent growth in the October-December quarter of the current fiscal.

Indian economy contracted for two consecutive quarters of June and September this fiscal, thereby entering into recession. Contraction was 23.9 per cent and 7.5 per cent respectively.

ICRA expects Indian economy to contract 7 per cent in current fiscal and growth to rebound to 10.5 per cent in the next fiscal beginning April 1.

Nayar said there could be upside to growth in FY22 if the government's capital expenditure increases, budget announcements are implemented and vaccination drives are carried out.

Fang said Moody's has some concern about policy implementation going forward and the degree to which the government can execute on some of the growth supportive measures, like capex spending, is going to have an impact on growth forecast.

Fibre2Fashion News Desk (DS)

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