Moody’s revises up India’s GDP growth forecast of FY21; says new stimulus measures to boost output, jobs

Moody’s revises up India’s GDP growth forecast of FY21; says new stimulus measures to boost output, jobs

India's GDP, GDP in FY21, economic recovery, stimulus measuresThe forecast has been revised by keeping in mind the latest stimulus that prioritises manufacturing and job creation, and focuses on longer-term growth.

In a continuation of rating agencies upwardly revising India’s GDP forecast for the current fiscal FY 2020-21, Moody’s Investors Service today raised India’s growth forecast in FY21 to a narrower contraction of 10.6 per cent, compared to an estimate of an 11.5 per cent contraction earlier. Moody’s said that the forecast has been revised by keeping in mind the latest stimulus that prioritises manufacturing and job creation, and focuses on longer-term growth. It added that the latest measures aim to increase the competitiveness of India’s manufacturing sector and create jobs while supporting infrastructure investment, credit availability, and stressed sectors.

Moody’s has also raised the growth forecast for the next fiscal year FY 2021-22 from 10.6 per cent to 10.8 per cent. It is to be noted that the government had last week announced a fresh fiscal package amounting to Rs 2.7 lakh crore.

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Moody’s added that India’s economic growth is expected to settle around 6 per cent in the medium term. Also, the government debt is expected to increase to 89.3 per cent of GDP in fiscal 2020 and decline to 87.5 per cent in fiscal 2021, from an already elevated 72.2 per cent in fiscal 2019, the global rating agency highlighted. It was further underlined that the consumer confidence in India remains relatively low amid an elevated number of daily new coronavirus cases, although this has come down from a peak in September. 

Meanwhile, many rating agencies, including Goldman Sachs and Barclays, have raised India’s GDP forecast recently. Jonathan Sequeira and Andrew Tilton, economists at Goldman Sachs, said that a pivotal assumption for our 2021 India growth outlook is broad-based availability of an effective vaccine, which could allow containment policies and mobility to normalize fully by mid-2022. On the other hand, Rahul Bajoria, Chief India Economist, Barclays said that it is expected that the recent improvement in manufacturing to broaden to the services sector early next year. The report also underlined that it sees a better trajectory for the recovery of consumption as well as investment, given incrementally rising fiscal and monetary support.

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