Home / News / India /  Moody’s cuts India’s GDP growth outlook for this year to 2.5%

Moody’s Investors Service on Friday slashed India’s economic growth projection for 2020 from 5.3% to 2.5%, as the Covid-19 outbreak causes an unprecedented shock to the global economy.

“The governments of India (Baa2 negative) and South Africa (Baa3 negative) have announced 21-day lockdowns. We expect these measures to dampen economic growth in both countries this year. For India, we are now projecting growth rates of 2.5% in 2020 followed by 5.8% next year," Moody’s said in its Global Macro Outlook.

The rating agency said in India, credit flow to the economy already remains severely hampered because of severe liquidity constraints in the bank and non-bank financial sectors.

Reserve Bank of India governor Shaktikanta Das while announcing a financial package on Friday said the implied real GDP growth of 4.7% for January-March quarter of 2019-20 as per estimates of the National Statistics Office within the annual estimate of 5% for the year as a whole is now at risk from the pandemic’s impact on the economy. “As regards the outlook for 2020-21, apart from the continuing resilience of agriculture and allied activities, most other sectors of the economy will be adversely impacted by the pandemic, depending upon, I repeat, its intensity, spread and duration. If Covid-19 is prolonged and supply chain disruptions get accentuated, the global slowdown could deepen, with adverse implications for India. The slump in international crude prices could, however, provide some relief in the form of terms of trade gains. Downside risks to growth arise from the spread of COVID-19 and prolonged lockdowns. Upside growth impulses are expected to emanate from monetary, fiscal and other policy measures and the early containment of Covid-19," he added.

Crisil Ltd on Thursday slashed its growth projection for India for 2020-21 to 3.5% from 5.2% earlier because of the nationwide lockdown and decline in discretionary spending. The rating agency said the measures will aggravate the downturn in the April-June quarter, and the sharp slowdown in key trading-partner economies will lead to a slump in exports.

Icra Ltd also on Thursday pared down its growth projection for 2020-21 to 4.2% from an estimated 4.4% in 2020-21. “We now expect the impact of social distancing and the lockdowns to limit GDP growth to 2.4% in Q4 FY2020 and a marginal 0.5% in Q1 FY2021, despite the support from agriculture and government spending," it added.

Moody’s said the G-20 economies will experience an unprecedented shock in the first half of this year and will contract in 2020 as a whole, before picking up in 2021. “We have revised our growth forecasts downward for 2020 as the rising economic costs of the coronavirus shock and the policy responses to combat the downturn are becoming clearer. We now expect G-20 real GDP to contract by 0.5% in 2020, followed by a pickup to 3.2% growth in 2021. In November, before the emergence of the coronavirus, we were expecting G-20 economies to grow by 2.6% in 2020," it added.

Moody’s slashed growth forecast for China to 3.3% in 2020, followed by 6% growth in 2021.

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