Rating agency Moody's on Thursday, 25 February revised India's growth projection for the fiscal year starting from 1 April 2021 to 13.7% from 10.8%, which was the estimate earlier.
The change followed the normalisation of activity and the growing confidence in the market as the COVID-19 vaccines rolled out in the country, they said.
Further, the agency also revised its estimated contraction for the current financial year. The agency informed that it expects the economy to contract 7%, which is lower than its previous estimate of 10.6%.
Moody's Investors Service Associate Managing Director (Sovereign Risk) Gene Fang said, "Our current expectation is that in the current fiscal ending March 2021, the economy would contract 7%. We expect a rebound of 13.7% growth in the next fiscal on the normalisation of activity and base effects," Livemint quoted.
The rebound comes as the agency is of the view that market activity will continue to recover with the rollout of COVID-19 vaccines and the growing confidence of normalisation of processes, Fang said in an online conference coordinated by Moody’s and ICRA Ltd on India Credit Outlook 2021.
Moody’s also projects that the central government's fiscal deficit for FY2021 and FY2022 will be lower than projected, supported by stronger revenue generation in the fourth quarter of FY2021 and higher nominal GDP growth in fiscal 2022, Livemint reported.
Fang added, "Still, wide fiscal deficits combined with lower real and nominal GDP growth over the medium term will constrain the government's ability to reduce its debt burden.”
(With inputs from Livemint)