New Delhi: Moody’s Investors Service said on Thursday it expects India’s economy to shrink by 8.9% in the 2020 calendar year due to the COVID-19 pandemic, compared to an earlier forecast of a 9.6% contraction.
The revision comes as a rise in novel coronavirus cases slows in the world’s second-most populous country, and economic activity picks up after a 23.9% contraction in April-June, when consumer spending, private investments and exports collapsed during one of the world’s strictest lockdowns.
“The steady decline in new and active (COVID-19) cases since September, if maintained, should enable further easing of restrictions. We, therefore, forecast a gradual improvement in economic activity over the coming quarters,” Moody’s said in a note.
In September, Moody’s had forecast the economy to shrink by 9.6% in the 2020 calendar year.
Additionally, according to a Reserve Bank of India (RBI) official, the gross domestic product (GDP) is likely to contract by 8.6% for the July-September period. That means the Indian economy likely entered into a recession for the first time in history at the end of the first half of 2020-21, with two successive quarters of negative growth due to the COVID-19 pandemic.
Finance minister Nirmala Sitharaman on Thursday announced a fresh round of stimulus measures worth Rs 2.65 lakh crore to help pull the economy out of its historic contraction. She added that the central bank recently predicted a strong likelihood of the Indian economy returning to positive growth in the third quarter of fiscal year 2020-21 and that recent economic recovery was not due only to pent-up demand.
Separately, Goldman Sachs upgraded India to “overweight”, citing a domestic macro recovery. It said Indian equities were most “positively sensitive to the improving prospects of a vaccine”.
Rahul Gandhi hits out
Meanwhile, Congress leader Rahul Gandhi accused Prime Minister Narendra Modi of devising policies that resulted in the poor showing of the Indian economy.
Taking to Twitter, he said, “India has entered into recession for the first time in history. Mr Modi’s actions have turned India’s strength into its weakness.”
भारत के इतिहास में देश में पहली बार मंदी छाई है।
भारत की ताक़त को मोदी जी ने कमज़ोरी में बदल दिया।
— Rahul Gandhi (@RahulGandhi) November 12, 2020
He cited a news report wherein the Reserve Bank of India has said that the country’s GDP is likely to contract by 8.6% in the July-September quarter, resulting in a technical recession for the first time in India’s history.
With inputs from Reuters and PTI