Moody's Investors Service on Tuesday projected India’s growth at 9.6 percent for the 2021 calendar year and 7 percent for 2022, unchanged from its May 2021 forecast, citing the picking up of economic activity alongside the gradual easing of COVID-19 restrictions.
The credit rating agency said it expects further upside to growth as economies around the world progressively reopen.
Moody's also expects the Reserve Bank of India to maintain an accommodative policy stance until economic growth prospects durably improve and that the central bank shall maintain status quo until the end of this year.
Moody's forecast comes on a day when the government is scheduled to release the GDP print for Q1FY22. Due to the national lockdown last year, GDP had contracted by nearly 24 percent and because of that low base effect, a CNBC-TV18 Poll is pegging growth this year at nearly 20 percent.
The US-based agency had in June slashed India's growth projection to 9.6 percent for the 2021 calendar year from its earlier estimate of 13.9 percent and had said faster COVID vaccination will be paramount in restricting economic losses to the June quarter.
On the global economy, Moody's said growth rebound has solidified but the spread of Delta variant of COVID-19 continues to pose risks.
It said that the rate of vaccination, the extent of serious infections, and mobility restrictions remain key determinants of the economic recovery cycle.
Moody’s has estimated that G-20 economies will grow by 6.2 percent as a whole in 2021 against the 3.2 percent contraction in 2020. The group will grow 4.5 percent in 2022, it added.
“G-20 advanced economies will grow by 5.6% collectively in 2021 and by 4.2% in 2022 while emerging markets will collectively expand by 7.2% in 2021, and slow to 5.1% growth in 2022. Excluding China (A1 stable), we project G-20 emerging market economies will expand by 5.7% and 4.1% in 2021 and 2022, respectively,” the rating agency said in its report titled ‘Global Macro Outlook 2021-22’.
Moreover, Moody’s expects inflation to remain elevated through 2021 and to subside in 2022. It said, the base effects will reverse and the impact of one-off price increases amid reopening pressures will fade in 2022. “Eventually, we expect that inflation will settle within central bank targets as demand growth falls back and supply bottlenecks ease,” the agency added.
It has, however, warned, that monetary and financial conditions are set to tighten, but not excessively so.
According to Moody’s, risks will evolve over time as the pandemic becomes a less important economic driver. “Most immediate risk to forecasts in near term relates to the evolution of the pandemic,” it said.
Moody’s added that “unprecedentedly” high levels of public and private sector debt could become concerning from a debt sustainability standpoint if growth and revenue prospects dim. Moreover, high debt can limit the ability of governments to provide support to the economy during downturns and can weigh on investment and economic growth in the long run, it said.
(Edited by : Kanishka Sarkar)