Moody’s slashes India’s FY22 GDP forecast to 9.3% due to 2nd Covid-19 wave

India, hit by a deadly second wave of the coronavirus disease (Covid-19), saw an increase in the daily number of cases and related fatalities. But in the last two days, the number of cases have been declining.

Rating agency Moody’s Investor Service on Tuesday slashed India’s Gross Domestic Product (GDP) growth forecast for the current financial year 2021-22 to 9.3 per cent from the projected 13.7 per cent due to the negative impact of the second wave of the coronavirus disease (Covid-19). The second wave will slow down the near-term economic recovery and could weigh on longer-term growth dynamics, Moody’s said.

The second wave will slow down the near-term economic recovery and could weigh on longer-term growth dynamics, Moody’s said. (AP file photo. Representative image)

Issuing a release, it said the negative impact on India’s economic output is expected to be limited to the April-June quarter, followed by a strong rebound in the second half of the year.

“As a result of the negative impact of the second wave, we have revised our real, inflation-adjusted GDP growth forecast down to 9.3 per cent from 13.7 per cent for fiscal 2021 and to 7.9 per cent from 6.2 per cent in fiscal 2022. Over the longer term, we expect growth of around 6 per cent thereafter,” the rating agency added.

India, hit by a deadly second wave, saw an increase in the daily number of cases and related fatalities. But in the last two days, the number of cases have been declining.

Moody’s also said it expects a wider general government deficit of around 11.8 per cent of the GDP in fiscal 2021, compared with its previous forecast of 10.8 per cent and an estimated 14 per cent in fiscal 2020. The combined impact of slower growth and wider deficit will drive the general government burden to 90 per cent of the GDP in fiscal 2021 which will gradually increase to 92 per cent in fiscal 2023, it said in the release.

Apart from Moody’s, two other agencies have also predicted a downfall in India’s GDP growth in the current financial year due to the deadlier second wave of the pandemic.

Rating agency Crisil said on Tuesday the GDP might drop to 8.2 per cent in financial year 2021-22 if the second wave peaks by the end of June. On the other hand, Japanese financial services company Nomura on Tuesday slashed the GDP growth to 10.8 per cent from the projected 12.6 per cent and held the Covid-19 lockdowns responsible for this reduction.

(With agency inputs)