NEW DELHI: Moody’s Investors Service on Thursday revised its forecast for India’s economy and said it will shrink by 8.9 per cent in calendar year 2020 due to the ongoing pandemic, against an earlier forecast of a deeper 9.6 per cent contraction.
The revision comes as the number of active Coronavirus cases has fallen from a peak of 10 lakh to 4.89 lakh and the economy starts picking up pace after a contraction of nearly 24 per cent in the April-June quarter.
“The steady decline in new and active (COVID-19) cases since September, if maintained, should enable further easing of restrictions. We, therefore, forecast a gradual improvement in economic activity over the coming quarters,” Moody’s said in a note.
The Indian economy likely entered into a technical recession for the first time since independence at the end of the first half of 2020-21.
The Reserve Bank of India has `Nowcast’ that India’s GDP for the July-September quarter is set to contract by 8.6 per cent.
The central bank, however, also forecasts that there would be positive growth in the current October-December quarter.
In its Global Macro Outlook 2021-22, Moody’s also revised upwards India’s GDP forecast for calendar year 2021 to 8.6 per cent growth from an earlier projection of 8.1 per cent expansion.
India had grown by 4.8 per cent in 2019. Moody’s pointed out that restrictions have eased slowly and in phases, with localised restrictions in containment zones continuing.
“As a result, the recovery has been patchy.” However, it said that a steady decline in new and active coronavirus cases since September could enable a further easing of restrictions. “We, therefore, forecast a gradual improvement in economic activity,” it said.
Speaking of emerging market economies, Moody’s warned that “going forward, neither trade growth nor a commodity price boom is likely to be a reliable source of growth. And limited room for fiscal support will likely undermine the strength of the recovery.”