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Moody’s cuts India growth forecast – Hindustan Times

Moody’s Investors Service on Tuesday sharply cut India’s FY22 growth forecast to 9.3% from 13.7% estimated earlier, as it joined other global rating firms in trimming growth expectations for Asia’s third-largest economy amid a devastating second wave of Covid-19.

Moody’s cautioned that risks from deeper stresses in the Indian economy and financial system could lead to a more severe and prolonged erosion in fiscal strength, exerting further pressure on India’s credit profile.

“The reimposition of lockdown measures will curb economic activity and could dampen market and consumer sentiment. However, we do not expect the impact to be as severe as during the first wave. Unlike the first wave where lockdowns were applied nationwide for several months, the second wave ‘micro-containment zone’ measures are more localised, targeted and will likely be of shorter duration. Businesses and consumers have also grown more accustomed to operating under pandemic conditions. As of now, we expect the negative impact on economic output to be limited to the June quarter, followed by a strong rebound in the second half of the year,” it said.

Brickwork Ratings, in April revised its FY22 economic growth projection for India to 9% from 11% estimated earlier. S&P Global Ratings last week said it expects India’s GDP to grow 9.8% under its moderate scenario and at 8.2% under the severe scenario based on when the current wave peaks.

Moody’s, which has assigned its lowest investment grade with negative outlook for India, said persistent obstacles to growth—including weak infrastructure, rigidities in labour, land, and product markets, and rising financial sector risks mean a rating upgrade is unlikely in the near future. “However, we would change the outlook on India’s rating to stable if economic developments and policy actions were to raise confidence that real and nominal growth will rise to sustainably higher rates than we project… Commensurate action to halt and reverse the rise in the debt trajectory, even slowly, would also promote a stable outlook,” it said.