Moody’s has revised its projection of India’s GDP contraction for this financial year from 11.5 percent to 10.6 percent. The rating agency had predicted in September a contraction of 11.5 percent. The agency has attributed the positive credit to the stimulus package announced by the Indian government aimed at making the manufacturing sector more competitive and enhancing the access to credit.
With the addition of 10 more sectors to the production-linked incentive (PLI) scheme, the manufacturing sector will become more competitive, private investment will be replenished, which will in turn create more jobs, the agency said.
“As countries have increasingly looked at greater diversification in their supply chains since the coronavirus pandemic, the timely introduction of these measures could boost India’s manufacturing industry, which contributed around 15 percent of GDP in 2019," Moody’s said, adding that widening the scope of the credit guarantee scheme will drive credit flow and aid recovery.
However, the rating agency has pointed out the fact that consumer confidence in India continues to remain relatively low amid rising number of new coronavirus cases, while acknowledging that the daily rise in cases has come down from its peak in September. Moody’s also raised its forecast for India’s GDP for fiscal 2021-22 to 10.8 percent from 10.6 percent projected earlier. Meanwhile, Barclays said it now expects India’s GDP to shrink 6.4 percent in the current fiscal, worse than its previous prediction of a 6 percent contraction. It expects GDP to fall by 8.5 percent in the second quarter of the current fiscal year, which is close to the Reserve Bank of India’s forecast.
Revising its growth forecast for India for the next fiscal year to 8.5 percent from an earlier projection of 7 percent, Barclays said the country would ‘return to normal’ faster than expected as the covid-19 curve has started flattening. “The prospect of an effective vaccine in the near future and high seroprevalence of antibodies across the population support the case for a more durable economic recovery," it said in a note.
