Moody’s pegs India’s FY21 GDP growth at 0%

| | New Delhi
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Moody’s pegs India’s FY21 GDP growth at 0%

Saturday, 09 May 2020 | PTI | New Delhi

Moody’s Investors Service on Friday projected India’s growth at zero per cent for the current fiscal and said the negative outlook on sovereign rating reflects increasing risks that GDP growth will remain significantly lower than in the past.

The outlook also partly shows weaker policy effectiveness to address economic and institutional issues, it noted in the update to its November 2019 rating forecast.

Stating that the negative outlook indicates that an upgrade is unlikely in the near term, Moody’s said high government debt, weak social and physical infrastructure, and a fragile financial sector face further pressures due to the coronavirus outbreak.

Moody’s had, in November 2019, affirmed India’s ‘Baa2’ rating but revised downward the outlook to negative from stable on concerns of lower economic growth.

‘Baa2’ is an investment grade rating with moderate credit risk, and is two notches above the junk grade.

The negative outlook reflects increasing risks that economic growth will remain significantly lower than in the past, it said. “This is in light of the deep shock triggered by the coronavirus outbreak, and partly reflects lower government and policy effectiveness at addressing longstanding economic and institutional weaknesses, leading to a gradual rise in the debt burden from already high levels,” Moody’s said in a credit opinion titled ‘Government of India- Baa2 negative’.

It said the shock from coronavirus pandemic will exacerbate an already material slowdown in economic growth, which has significantly reduced the prospects for durable fiscal consolidation and government measures to support the economy should help to reduce the depth and duration of slowdown.

“However, prolonged financial stress among rural households, weak job creation and, more recently, a credit crunch among non-bank financial institutions (NBFIs) have increased the probability of a more entrenched weakening,” Moody’s said.

It added that prospects of further reforms to support business investment and growth at high levels, and significantly broaden the narrow tax base, have diminished.

Moody’s projected India’s economic growth for 2020-21 fiscal at 0 per cent, lower than 4.8 per cent estimated in 2019-20.  

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