Moody's raises FY'21 India growth forecast to (-) 10.6%

Moody's Investors Service on Thursday upped India growth forecast to (-) 10.6 per cent for the current fiscal, from its earlier estimate of (-) 11.5 per cent, saying the latest stimulus prioritises manufacturing and job creation, and focuses on longer-term growth.

Last week the government had announced a new fiscal package amounting to Rs 2.7 lakh crore.

Moody's said the latest measures aim to increase the competitiveness of India's manufacturing sector and create jobs, while supporting infrastructure investment, credit availability and stressed sectors.

As such, they present potential upside to our current growth forecasts, a credit positive, it added.

"We have revised our real, inflation-adjusted GDP forecast for fiscal 2020 (April 2020-March 2021) to a 10.6 per cent contraction, from a 11.5 per cent drop previously," Moody's said.

For next fiscal 2021-22, Moody's projected India to grow at 10.8 per cent, as against the previous estimate of 10.6 per cent.

According to Moody's, India's economic growth is expected to settle around 6 per cent in the medium term.

"We forecast government debt to increase to 89.3 per cent of GDP in fiscal 2020 and decline to 87.5 per cent in fiscal 2021, from an already elevated 72.2 per cent in fiscal 2019," the global rating agency said.

Moody's, however, said that consumer confidence in India remains relatively low amid an elevated number of daily new coronavirus cases, although this has come down from a peak in September.