Moody’s cuts India growth forecast for 2021 to 9.6 per cent

New Delhi, June 23

Moody's Investors Service on Wednesday slashed India's growth projection to 9.6 per cent for 2021 calendar year, from its earlier estimate of 13.9 per cent, and said faster vaccination progress would be paramount in restricting economic losses to the June quarter.

In its report titled 'Macroeconomics – India: Economic shocks from second Covid wave will not be as severe as last year's', Moody's said high-frequency economic indicators showed that the second wave of Covid infections hit India's economy in April and May. With states now easing restrictions, economic activity in May is likely to signify the trough.

"The virus resurgence adds uncertainty to India's growth forecast for 2021; however, it is likely that the economic damage will remain restricted to the April-June quarter. We currently expect India's real GDP to grow at 9.6 per cent in 2021 and 7 per cent in 2022," Moody's said.

Earlier this month, Moody's had projected India to clock a 9.3 per cent growth in the current fiscal ending March 2022, but a severe second Covid wave has increased risks to India's credit profile and rated entities.

Indian economy contracted by 7.3 per cent in fiscal 2020-21 as the country battled the first wave of Covid, as against a 4 per cent growth in 2019-20.

Stating that stringent lockdowns in economically significant states will mar April-June quarter economic activity, Moody's said the 10 states that have been hardest hit by the second wave collectively account for more than 60 per cent of the pre-pandemic level of India's GDP.

Four states - Maharashtra, Tamil Nadu, Uttar Pradesh and Karnataka - contributed the largest shares among all states in financial year 2019-20.

Moody's said faster vaccination progress would be paramount in restricting economic losses to the current quarter. As of the third week in June, only about 16 per cent of the population had received one vaccine dose; of those, only about 3.6 per cent had been fully vaccinated. PTI