India’s GDP To Hit ‘Zero’ In FY21: Moody’s

Moody’s Investors Service said it estimates India’s GDP growth to hit ‘zero’ in FY21. Painting a grim picture of economy to a wide fiscal deficit, high government debt, weak social and physical infrastructure, and a fragile financial sector.

It said that the quality of India’s economic growth has declined in recent years, demonstrated by financial stress among rural households, relatively low productivity and weak job creation.

India’s economy will remain flat in FY21, with estimated India’s gross domestic product (GDP) growth to be at zero, but will be seen accelerating to 6.6 per cent in FY22.

Moody’s has warned that the COVID-19 “shock will exacerbate an already material slowdown in economic growth, which has significantly reduced prospects for durable fiscal consolidation”.

Icra, the local arm of Moody’s has already pegged for a contraction of up to 2 per cent in the growth as a result of the crisis, which has seen the country being put under a lockdown for nearly two months due the ongoing pandemic.

In March, the government had announced a relief package worth Rs 1.7 lakh crore, and there are speculations of another follow-up package in the near future. These measures will reduce the depth and duration of India’s growth slowdown, but there is a probability of an weakening on prolonged financial stress among rural households, weak job creation and a credit crunch among non-bank financial institutions, the Agency said.

Moody’s has warned that a downgrade in the rating could happen if the fiscal metrics weakened materially, and made it clear that a “negative” outlook indicates that an upgrade in the rating is unlikely in the near term. However, the outlook can be changed to “stable” if the fiscal metrics stabilise, it added.