Advertisement
Thursday, Sep 23, 2021
Outlook.com
Outlook.com

India's GDP Likely To Grow At 12% In 2021: Moody's Analytics

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

India's GDP Likely To Grow At 12% In 2021: Moody's Analytics
Representational image. | File photo
India's GDP Likely To Grow At 12% In 2021: Moody's Analytics
outlookindia.com
2021-03-19T14:30:50+05:30

According to Moody’s Analyics, India's economy is likely to grow by 12 per cent in 2021 following a 7.1 per cent contraction last year, as near-term prospects have turned more favourable.

India's near-term prospects have turned more favourable after a stronger than expected December quarter GDP growth of 0.4 per cent following a 7.5 per cent contraction in the previous three months, 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 nonresidential investment to materially pick up over the next few quarters and strengthen the domestic demand revival in 2021," it said.

Moody's saw real GDP growth of 12 per cent 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 per cent above pre-COVID-19 levels (as of March 2020) by the end of 2021, or equivalently, by 5.7 per cent 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 per cent 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.

"We expect the budget for fiscal 2021-2022 to drive the annual fiscal deficit to nearly 7 per cent of GDP," it said. "It includes additional expenditure on infrastructure development, and the associated benefits in the form of employment creation should accrue over the coming quarters."

Core inflation is likely to see a more controlled rise in 2021, although food-price or fuel-driven inflation can become a recurring factor, weighing on household disposable income.

Moody's Analytics said a strengthening second wave of COVID-19 remains the key risk to recovery in 2021.

"The good news is that the resurgence appears to be limited to just a few states, which should increase the chances of containing the spread at an early stage," it said. "Our baseline forecasts assume that state governments are likely to adopt a targeted approach through limited-duration curfews and shutdowns if the situation deteriorates rather than large-scale shutdowns of the kind seen during the first wave."

Vaccinations hold the key to sustaining domestic recovery. Total vaccinations crossed the 35 million mark on March 16.

"However, the various logistical constraints and the sheer scale of implementation could negatively impact the pace of inoculations in the months ahead and eventually the timing of achieving herd immunity," it said. "Our March baseline forecast assumes that herd immunity is unlikely to be reached before the end of 2022."

(With PTI inputs.)

Advertisement

Outlook Newsletters

Advertisement

Read More from Outlook

No 'JAIAUKUS'? US Won't Add India, Japan To New Australia-UK Security Alliance

No 'JAIAUKUS'? US Won't Add India, Japan To New Australia-UK Security Alliance

The trilateral security alliance—AUKUS among Australia, UK and US is seen as an effort to counter China in the Indo-Pacific.

SC To Announce Its Decision On Pegasus Snooping Row Next Week

SC To Announce Its Decision On Pegasus Snooping Row Next Week

The Supreme Court said the decision on the pleas into the Pegasus snooping row will be announced next week.

Iyer Respects DC's Decision To Retain Pant As Captain In IPL 2021

Iyer Respects DC's Decision To Retain Pant As Captain In IPL 2021

The 26-year-old returned to action post-injury layoff with a blistering unbeaten 47 in Delhi Capitals' eight-wicket win over SRH in Dubai.

Umar Khalid's Bail Plea Hearing In Delhi Riots Case Adjourned Till October 9

Umar Khalid's Bail Plea Hearing In Delhi Riots Case Adjourned Till October 9

A Delhi court on Thursday adjourned to October 9 the hearing on the bail plea of former JNU student leader Umar Khalid in the 2020 Delhi riots conspiracy case.

Advertisement