Moody’s also revised the country’s GDP growth outlook for the financial year 2021-2022 (FY22) downwards to 9.3% from 13.7% projected earlier.
Global ratings agency Moody’s on Tuesday reiterated its lowest investment grade ‘Baa3’ for India with a negative outlook. It is likely to be a non-event for markets owing to a steady decline of the US Dollar globally and lower imports by India, say experts.
Moody’s also revised the country’s GDP growth outlook for the financial year 2021-2022 (FY22) downwards to 9.3% from 13.7% projected earlier. It also ruled out a sovereign ratings upgrade in the short term.
The massive cut to GDP projection for FY22 was a result of the negative impact of the second wave of the pandemic on the economy, it said.
“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% from 13.7% for fiscal 2021 and to 7.9% from 6.2% in fiscal 2022. Over the longer term, we expect growth of around 6.0% thereafter,” said Moody’s in a statement.
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, it added.
Lockdowns will curb economic activity and could dampen market and consumer sentiment but the impact will not be as severe as last year when a nationwide lockdown was imposed during the first wave, it further said.
“Unlike the first wave where lockdowns were applied nationwide for several months, the second wave “micro-containment zone” measures are more localized, targeted and will likely be of shorter duration, the statement added.
The second wave and a resultant redirection of spending toward healthcare and virus response relative to what the government budgeted in February will likely contribute to a marginal shortfall, the ratings agency said.
“As a result, we now expect a wider general government fiscal deficit of about 11.8% of GDP in fiscal 2021, compared with our previous forecast of 10.8% and an estimated 14% in fiscal 2020. We expect the combined impact of slower growth and a wider deficit to drive the general government debt burden to 90% of GDP in fiscal 2021, gradually rising to 92% in fiscal 2023”.
https://www.timesnownews.com/business-economy/economy/article/moodys-slashes-india-fy22-gdp-projection-to-9-3-maintains-baa3-rating-with-negative-outlook/755731
