Indian economic system prone to develop at 12%: Moody’s


New Delhi, March 19

India’s economy is likely to grow by 12% in 2021 following a 7.1% contraction last year, as near-term prospects have turned more favourable, Moody’s Analytics said.

A stronger than expected December quarter GDP growth of 0.4% following a 7.5% contraction in the previous three months has turned India’s near-term prospects more favourable, it said.

Domestic and external demand has been on the mend since the easing of restrictions, which has led to improved manufacturing output in recent months.

“We expect private consumption and non-residential investment to materially pick up over the next few quarters and strengthen the domestic demand revival in 2021,” it said.


‘Near-term prospects more favourable’

  • A stronger-than- expected December quarter GDP growth of 0.4% following a 7.5% contraction in the previous three months has turned India’s near-term prospects more favourable, Moody’s Analytics said
  • Domestic and external demand has been on the mend since the easing of restrictions, which has led to improved manufacturing output in recent months

Moody’s saw real GDP growth of 12% in the 2021 calendar year, partially due to a low base-year comparison.

“This forecast is equivalent to real GDP, in level terms, growing by 4.4% above pre-Covid levels (as of March 2020) by the end of 2021, or equivalently, by 5.7% above the GDP level in December 2020 by the end of 2021,” it said. It said monetary and fiscal policy settings will remain conducive to growth.

“We do not expect any additional rate cuts this year below the current 4% at which the benchmark repurchase rate is being maintained,” it said.

It saw some additional fiscal support being mobilised during the second half of the year, depending on the softness in domestic spending.

Direct forms of fiscal support such as income tax cuts, however, are less likely in the current setting. — PTI



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