InvestorQ : Has Moody’s upgraded India’s GDP growth outlook for FY22?
Moii Chavate made post

Has Moody’s upgraded India’s GDP growth outlook for FY22?

Tisha Malhotra answered.
1 year ago

That is correct and here is what you need to know about the upgrade of GDP by Moody’s.

· According to Moody’s India’s GDP is projected to grow at the rate of 12% for calendar year 2021, which should improve its prospects for financial year 2021-22 substantially.

· This is substantially higher than the earlier estimate put out by Moody’s pegging India’s full year GDP growth for 2021 at 9%.

· However, Moody’s has also warned that while the near-term prospects for India were more favourable, a second wave of COVID-19 infections could be a key risk.

· The upgrade was triggered by a stronger than anticipated GDP growth of 0.4% in the Dec-20 quarter after 2 successive quarters of GDP contraction.

· According to Moody’s, although agriculture may still lead the show, there was visible improvement in manufacturing output in recent months.

· This should come as a big relief because the Indian economy is expected to contract by 8% in fiscal year 2020-21 and will be the worst performance since 1979. However, Moody’s has pointed out that the recovery would be more statistical than structural.

· Recently, the OECD had projected 12.6% GDP growth for India in FY22, which would be the highest among G20 countries.

· Moody’s expects private consumption and non-residential investment to pick up in a substantial manner in the next few quarters and aid demand revival. However, on a longer term basis, this would be equivalent to just about 4.4% GDP growth pre-COVID.

· While warning about the resurgence of COVID in India, Moody’s has expressed confidence that the resurgence was limited to just a few states and hence containing the spread was a lot more critical for the Indian economy.

· The final word is that the pace and intensity of the vaccination drive would hold the key to sustaining the domestic recovery. While more than 3.5 crore people had been already vaccinated, there are worries that it could be still too small considering the size of the Indian population and risk at a macro scale.

· On the vaccination front, Moody’s has warned that logistical constraints and the scale of implementation could hamper the pace of inoculations and the next few months would be critical. That could be the biggest X-factor in India achieving higher rates of growth.