Finance minister Nirmala Sitharaman on Thursday said that the global ratings agency Moody’s has reassessed the country’s growth numbers after looking at the rapid Covid-19 recovery in the country.
“I would like to announce a few new measures in the series of stimulus announcements we have been doing… there are quite a few indicators showing a distinct recovery in the economy,” Sitharaman said while addressing a press conference.
“Markets are on a record-high and India’s foreign exchange reserves are at US $560 billion. India has made a strong comeback economically. The RBI has said that India will do better in the fourth quarter. So the mood in the country, as well as Moody’s rating for India, has improved,” said Minister of State for finance, Anurag Thakur, who addressed the press conference along with Sitharaman.
Earlier on Thursday, Moody’s had raised India’s GDP forecast for the calendar year 2020 upwards to -8.9 per cent contraction from -9.6 per cent contraction forecast earlier. Similarly, India’s GDP forecast for the calendar year 2021 has been revised upwards to 8.6 per cent from 8.1 per cent.
The rating agency said it sees “very gradual improvement in economic activity” in India.
The report released by Moody’s Investors Service attributed the reason behind better growth to the falling of coronavirus cases in the country.
According to Moody’s, recovery has been patchy in India as its economy had the biggest contraction – 24% year-over-year in the second quarter – as a result of a long and strict nationwide lockdown.
Although restrictions have eased only slowly and in phases, and localised restrictions in containment zones remain, the report said that, “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. However, slow credit intermediation will hamper the pace of recovery because of an already weakened financial sector.”
The ratings agency appreciated the Indian government for exploring ways to generate faster growth through reforms, including product and factor market liberalisation. Moody’s expects pandemic management will continue to improve over time, thereby reducing fear of contagion and allowing for a steady normalisation of social and economic activity. As a result, according to the report, coronavirus is expected to become a less important macroeconomic concern throughout 2021 and 2022.
India’s GDP shrank 8.6 per cent in the quarter ending September, the RBI said in its latest report. In the first quarter, the economy contracted 23.9 per cent. Despite performing poorly in the first two quarters of the current fiscal year, global agencies and economists believe India would bounce back in the fiscal year 2021-2022.