Moody’s pegs India’s 2020 growth at 2.5%, lower than China’s

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Published: March 28, 2020 5:15:27 AM

ICRA, too, trimmed its growth projection to 4.2% for FY21 from 4.4%, despite the support from agriculture and government spending.

The global rating agency has forecast a 0.5% contraction for the global economy in 2020, citing an unprecedented demand compression.The global rating agency has forecast a 0.5% contraction for the global economy in 2020, citing an unprecedented demand compression.

Moody’s on Friday sharply trimmed its growth projection for India to just 2.5% for 2020 from 5.3% earlier. The latest projection is lower than its forecast of 3.3% for China, the epicentre of the Covid-19 pandemic.

With this, Moody’s joins a clutch of agencies that has slashed their FY21 forecasts in the range of 2.5-4.2% in the wake of the coronavirus outbreak and the consequent lockdown. India’s growth, however, could rebound to 5.8% in 2021, while China’s may accelerate to 6%, Moody’s said.

The global rating agency has forecast a 0.5% contraction for the global economy in 2020, citing an unprecedented demand compression.

Moody’s projection comes on a day when the monetary policy committee of the Reserve Bank of India (RBI) cut the repo rate by as much as 75 basis points, with RBI governor Shaktikanta Das flagging risks to expansion in most sectors. “If Covid-19 is prolonged and supply chain disruptions get accentuated, the global slowdown could deepen, with adverse implications for India,” Das said. He added that the implied real GDP growth of 4.7% for the March quarter, based on the estimates of the National Statistics Office (NSO) in February, is now at risk because of the pandemic. The NSO had pegged the FY20 growth at 5%.

“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,” the governor said.

On Thursday, Crisil slashed its FY21 growth forecast for India by as much as 170 basis points to just 3.5%. It expected the impact of social distancing, drop in discretionary spending and a potential plunge in exports to exacerbate the slowdown in the June quarter.

ICRA, too, trimmed its growth projection to 4.2% for FY21 from 4.4%, despite the support from agriculture and government spending.

SBI’s group chief economic advisor Soumya Kanti Ghosh has estimated growth to collapse to just 2.6% in FY21, with a clear downward bias. The FY20 growth could also see a downward revision from 5% to 4.5%, with the March quarter expansion being 2.5%, he said in a report. The total cost of the lockdown is at least Rs 8.03 lakh crore (in nominal terms), output loss of at least 4%, an income loss of Rs 1.77 lakh crore and a loss in capital income of Rs 1.69 lakh crore, Ghosh said.

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