November 20, 2020: India’s economy will shrink by 10.6% this fiscal year, Moody’s Investors Service forecast on Thursday, raising its projection from the 11.5% contraction it had projected in September.
The global ratings agency said the Indian government’s latest ₹2.65 trillion stimulus package, aimed at increasing the competitiveness of the manufacturing sector, improving access to credit and nurturing the economic recovery, is a credit positive.
The addition of 10 more sectors to the production-linked incentive (PLI) scheme is expected to improve competitiveness of India’s manufacturing sector, revive private investment and create jobs, Moody’s said.
“As countries have increasingly looked to 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% of GDP in 2019,” Moody’s said, adding that widening the scope of the credit guarantee scheme will drive credit flow and aid recovery.
The ratings agency, however, said 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% from 10.6% projected earlier.
Meanwhile, Barclays said it now expects India’s GDP to shrink 6.4% in the current fiscal, worse than its previous prediction of a 6% contraction. It expects GDP to fall by 8.5% in the second quarter of the current fiscal year, almost in line with the Reserve Bank of India’s forecast.
Barclays also revised its growth forecast for India for the next fiscal year to 8.5% from an earlier projection of 7%, saying 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.
Source: live mint
