‘Mood in India, as well as Moody’s rating, improved,’ says government following announcement of new stimulus package
Finance Minister Nirmala Sitharaman said Thursday that global rating agency Moody’s has reassessed the country’s growth figures after noting the rapid recovery from Covid-19 in the country.
“I would like to announce some new measures in the series of stimulus announcements that we have been making … there are quite a few indicators that show a clear recovery in the economy,” Sitharaman said while addressing a press conference.
“The markets are at a record level and India’s foreign exchange reserves are $ 560 billion. India has had a strong economic recovery. 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 together with Sitharaman.
Earlier on Thursday, Moody’s had raised India’s GDP forecast for calendar year 2020 up to a contraction of -8.9% from the previous contraction forecast of -9.6%. Similarly, India’s GDP forecast for calendar year 2021 has been revised up to 8.6% from 8.1%.
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The rating agency said it sees “a very gradual improvement in economic activity” in India.
The report published by Moody’s Investors Service attributed the reason for the better growth to the drop in coronavirus cases in the country.
According to Moody’s, the recovery has been spotty in India, as its economy contracted the most (24% year-on-year in the second quarter) as a result of a long and strict national lockdown.
Although restrictions have been eased slowly and in phases, and localized restrictions in containment zones remain, the report says that, “The steady decline in new and active cases since September, if sustained, should allow for further relaxation of the restrictions. Therefore, we anticipate a gradual improvement in economic activity over the next few quarters. However, slow credit intermediation will hamper the pace of recovery due to an already weakened financial sector ”.
The rating agency thanked the Indian government for exploring ways to generate faster growth through reforms, including product and factor market liberalization. Moody’s expects that the management of the pandemic will continue to improve over time, thus reducing the fear of contagion and allowing a steady normalization of social and economic activity. As a result, according to the report, the coronavirus is expected to become a less important macroeconomic concern throughout 2021 and 2022.
India’s GDP contracted 8.6 percent in the quarter ending September, the RBI said in its latest report. In the first quarter, the economy contracted 23.9 percent. Despite underperforming in the first two quarters of the current fiscal year, global agencies and economists believe India will rebound in fiscal 2021-2022.
(With inputs from agencies)