Coronavirus Outbreak: Moody's Lowers India's 2020 Growth Projection To 5.3%

Amid major economic turbulence on the back of the novel coronavirus outbreak, Moody's Investors Service on Monday slashed its growth projection for India 2020 calendar year to 5.3 per cent.

The agency pointed at a slower recovery in Asia's third-largest economy as the global growth is likely take a hit after the deadly COVID-19 outbreak in China.

"While the economy may well begin to recover in the current quarter, we expect any recovery to be slower than we had previously expected. Accordingly, we have revised our growth forecasts to 5.4% for 2020 and 5.8% for 2021, down from our previous projections of 6.6% and 6.7%, respectively," it said.

The rating agency also slashed its global growth projection claiming that the coronavirus outbreak has reduced optimism about opportunities of stabilization of global growth this year.

The Indian economy is expected to grow at its slowest pace in 11 years at 5% in 2019-20. The Economic Survey has pegged the country's gross domestic product (GDP) growth at 6-6.5% for 2020-21.

Moody's also said it is still too early to come up with a final assessment of the impact of the virus on China and other economies around the globe.

"We have revised our global GDP growth forecast down, and we now expect G-20 economies to collectively grow 2.4% in 2020, a softer rate than last year, followed by a pickup to 2.8% in 2021. We have reduced our growth forecast for China to 5.2% in 2020 and maintain our expectation of 5.7% growth in 2021," it said.

The agency expects that the outbreak of the pandemic will be contained by the end of the January-March quarter. This shall allow time for the economy to bounce back and resume normal activity in the April-June quarter.

The agency states that the Chinese economy is by far the worst affected. However, other economies have also been exposed as a result of which, global tourism and supply chains in the first half of this year have been disrupted.

"Effects on the global economy could compound if the rate of infection does not abate and the death toll continues to rise, because supply chain disruptions in manufacturing would become more acute the longer it takes to restore normalcy," Moody's said.

To boost the economic momentum, Moody's prescribed the revival of both rural and urban demand. "But equally important is the resumption of credit growth in the economy," it said.

"Credit impulse in the economy has deteriorated throughout the last year as a result of the drying up of lending from non-bank financial institutions as well as from banks. The deterioration in credit growth to the commercial sector is particularly stark," Moody's said.

Also Read: OECD Slashes India's Growth Forecast For Financial Year 2020-21 To 5.1% Amid Coronavirus Woes