Moody’s: India’s GDP to slide to -3.1% in FY21

It said an economic recovery is underway, but its continuation will be closely tied to containment of the virus.

Global rating agency Moody’s on Tuesday retained its earlier India growth forecast at -3.1% for FY21 and 6.9% for FY22, lending some credence to the view that the economy could witness a “V-shaped recovery” next fiscal.

China, India and Indonesia will be the only G-20 emerging economies to witness a strong enough pickup of real GDP in the second half of 2020 and full-year 2021 to end next year above pre-coronavirus levels, it said in its latest Global Macro Outlook for 2020-21.

It said an economic recovery is underway, but its continuation will be closely tied to containment of the virus. “Economic data show a quick rebound in goods consumption in a number of advanced economies. However, pandemic fears will continue to hinder a complete recovery,” it added.

The agency has projected a 4.6% contraction for G-20 economies in 2020, followed by 5.3% growth in 2021. With the exception of China, which is predicted to record 1.9% growth in 2020 despite the pandemic, Moody’s expects economic activity in every G-20 economy to fall this year.

Coronavirus-related supply problems have led to a rise in food prices in several emerging market countries, such as Brazil, China, India, Mexico, Turkey and South Africa, Moody’s said. However, it’s a temporary phenomenon, and “we expect the current shock to be disinflationary overall”. “The scale and scope of fiscal accommodation differ widely, with advanced economies having provided far more robust policy response than most emerging market countries,” it said.