Moody's Investors Service has revised upwards India's GDP forecast citing the steady decline in new and active Covid-19 cases and easing of restrictions.
India's gross domestic product is estimated to contract by 8.9% in calendar year 2020 compared with a contraction of 9.6% predicted earlier, according to the Global Macro Outlook by Moody's published on Thursday. The ratings agency also revised India's GDP growth forecast for 2021 to 8.6% from 8.1% projected earlier.
Inflation is forecast at 5.5% for the FY21, and is estimated to ease to 4% in FY22 and 3.5% the year after, according to the report.
In emerging economies, including India, the recent decline in new infections, along with high recovery rates, is helping bend the pandemic curves and allowing for further easing of restrictions on mobility, the ratings agency said.
Economic recovery has remained patchy and gradual with restrictions being eased slowly and in phases, according to the note. The steady decline in new and active cases since September, if maintained, should enable further easing of restrictions.
“We therefore forecast a gradual improvement in economic activity over the coming quarters, “ it said, However, slow credit intermediation will hamper the pace of recovery because of an already weakened financial sector, the ratings agency said.
It said the scope for additional rate cuts is limited, with the central bank unlikely to continue with quantitative easing measures once the recovery strengthens. Monetary policy focus is likely to remain on improving transmission of rate cuts, it said.
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