Moody’s cuts India GDP growth to 2.5% from 5.3% in 2020

Moody’s Investors Service has slashed its estimate of India’s economic growth forecast to 2.5% during 2020 calendar year from an earlier estimate of 5.3% amid the rising economic cost of the coronavirus pandemic.

Moody’s said it expects the growth to bounce back to 5.8% in the calendar year in 2021 and expects a gross domestic product (GDP) growth of negative 0.5% in CY20 at the global level, before bouncing back in CY21.

Moody’s said, at the 2020 estimated growth rate, a sharp fall in incomes in India is likely, further weighing on domestic demand and the pace of recovery in 2021. This compares to 5% growth in 2019.

“The governments of India (Baa2 negative) and South Africa (Baa3 negative) have announced 21-day lockdowns. We expect these measures to dampen economic growth in both countries this year. For India, we are now projecting growth rates of 2.5% in 2020 followed by 5.8% next year,” Moody’s said in its Global Macro Outlook.

“In India, credit flow to the economy already remains severely hampered because of severe liquidity constraints in the bank and non-bank financial sectors,” it said.

The government had earlier projected GDP growth at 5% in 2019-20 as compared to 6.1% in 2018-19. Q3 had witnessed a 4.7% growth.

India on Thursday announced a 170,000 crore coronavirus relief package focused on additional food transfers at no cost, cash for vulnerable segments, concessions on government schemes aimed to help households reduce their expenditure, and support those on the frontline of the battle against the pandemic.