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S&P Global Ratings has kept India's economic growth forecast for the current fiscal year unchanged at 9.5 per cent but raised its projections for the next fiscal as impact of the Covid-19-mandated lockdowns dissipate.

India saw its gross domestic product (GDP) shrink by 7.3 per cent in financial year 2020-21 as economic activities took a massive hit due to the pandemic-induced restrictions. The gradual lifting of these restrictions has helped the economy to rebound from pandemic lows.

“India is learning to live with the virus. Following the peak in COVID-19 cases around mid-year, the stringency index has declined, mobility has recovered, and consumer and business confidence has improved," S&P Global Ratings said in a report.

Rising inflation is a pressure point, unlike elsewhere in emerging Asia, but external demand continues to support growth, S&P noted.

Recent high-frequency indicators such as the October services purchasing managers' index reading of 58.4 suggest a strong recovery is underway.

“We leave our growth forecast unchanged at 9.5 per cent for the fiscal year ending March 2022 and 7.8 per cent for the year ending March 2023. The ongoing broadening out of the recovery suggests that permanent costs are likely to be lower, and as a result, we revise higher our growth forecast for the fiscal year ending March 2024 to 6.0 per cent from 5.7 per cent earlier," it added.

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