Moody’s has revised India’s 2020 GDP forecast to -8.9% from previous -9.6%. Also, the rating agency has raised 2021 GDP forecast to 8.6% from 8.1% in Moody’s Global Macro Outlook 2021-22.
Moody’s revised forecast for India GDP in the 2020 calendar year comes in the wake of the decline in new Covid-19 infections across the country along with the higher recovery rates. According to the experts the pandemic curve is bending in India and allowing further easing of restrictions in sectors like mobility, resulting in improved economic activity. The test positivity rate in India has dropped below 5%.
According to Moody’s, if the above mentioned trends in the Covid-19 pandemic curve continue, it will spur mobility and social interactions. Clubbed with the economic development and arrival of a vaccine, they would make the pandemic a less important macro factory in 2021 and 2022 calendar years.
As Moody’s said, “We therefore forecast a gradual improvement in economic activity over the coming quarters.” However, it also predicted that the slow credit intermediation will hamper the pace of economic recovery because of an already weakened financial sector.
The Indian economy contracted by a massive 23.9% during April-June quarter of 2020 and set to have its worst contraction of more than 10% in FY21. A team of economists from the Reserve Bank of India (RBI) has already signalled that India’s economy probably shrank for a straight second quarter, pushing the country into an unprecedented recession.
The prolonged economic crisis has impacted the Indian economy heavily like several other global economies. Also, the Covid-19 pandemic crisis and the month-long lockdown announced by the central government in March 2020 made the scenario worse.
In a bid to revive the economy, the central government has been taking several initiatives through. Yesterday, Indian government announced the Production Linked Investment (PLI) scheme that allocates around Rs 1.46 lakh crore for 10 key manufacturing sectors. Also, the government has already announced financial aids for the pandemic struck business and industry sectors earlier this year.