The ratings agency also ruled out an upgrade in India’s sovereign ratings in the near future. Moody’s has said India’s credit profile remains constrained by obstacles to economic growth such as a high debt burden and a weak financial system.
India’s gross domestic product (GDP) forecast for the current financial year 2021-22 has been significantly slashed by rating agency Moody’s to 9.3 per cent from its earlier projection of 13.7 percent.
It also pointed out that a sovereign rating upgrade is unlikely in the near future. This is due to the ratings agency believing that the quality of India’s growth has also declined, alongside a marked slowdown in the rate of economic expansion in recent years. Also, it has pointed out that India’s credit profile is increasingly constrained by obstacles to economic growth.
A high debt burden and a weak financial system remain among the primary obstacles to economic growth, with risks being exacerbated by the coronavirus pandemic. Policymaking institutions have struggled to tackle and contain these risks, Moody’s said.
The latest cut in projections come in the wake of a severe health crisis nationwide, brought on by the second wave of the pandemic. Daily cases have remained above the 3-lakh-mark for the past 17 days in a row.
However, Moody’s has raised its forecast for real GDP in FY23 to 7.9 percent as compared to 6.2 percent earlier. The long term real GDP growth has been pegged at about 6 percent.
As a result of slower growth and rising deficit, Moody’s has estimated the general government debt burden to reach 90 per cent of GDP in fiscal FY22, and 90.8 percent in FY23.
The general govt fiscal deficit has been estimated at 11.8 percent of GDP in FY22, up from the 10.8 percent forecast earlier.
Inflation has been estimated at 4.8 percent in FY22, and at 4 percent in FY23.