Indian economy would rebound in the current fiscal ending March 2022 and clock a growth of 9.3 per cent, but a severe second Covid wave has increased risks to India’s credit profile and rated entities, Moody’s Investors Service said on Tuesday.
Moody’s, which has a ‘Baa3’ rating on India with a negative outlook, said it expects a decline in economic activity in the June quarter due to reimposition of lockdown measures along with behavioural changes on fear of contagion.
“India’s economy rebounded quickly from a steep contraction in 2020, but a severe second wave of the coronavirus has increased risks to the outlook with potential longer-term credit implications. Risks to India’s credit profile, including a persistent slowdown in growth, weak government finances and rising financial sector risks, have been exacerbated by the shock,” Moody’s said.
In an ‘FAQ on the coronavirus second wave and the sovereign’s medium-term credit challenges’, the US-based rating agency said the pandemic will leave new economic scars and deepen pre-pandemic constraints and GDP growth would average around 6 per cent in the longer term.
“We expect a decline in economic activity in the April-June quarter, followed by a rebound, resulting in real, inflation-adjusted GDP growth of 9.3 per cent in the fiscal year ending March 2022 (fiscal 2021) and 7.9 per cent in fiscal 2022,” it said, adding that the impact from potential subsequent waves remain a risk to its forecasts.