Moody’s GDP Forecast- Key Highlights

The Rating agency Moody’s have recently forecasted that the nominal Gross Domestic Product (GDP) of India will rise closer to 17% in the Financial Year 2021.

Key Highlights

  • The US-based rating agency further forecasts that, India’s fiscal deficit projections are higher than expected.
  • According to it, slower consolidation will constrain the fiscal strength of India in the medium term.
  • The growth rate projected by Moody’s is higher than what was proposed in the Union Budget 2021. The budget projected the GDP as 14.4%.
  • Further, the headline deficit projections are larger than their expectation.
  • It further says that, the focus of budget 2021 is on higher capital spending, financial sector reform and asset sales. This will help in stimulating the growth.
  • India has projected fiscal deficit of 9.5% of GDP for the Fiscal year 2020 that will end in March. So, the rating agency highlighted that, the greater transparency on off-balance-sheet food subsidy expenditure and conservative revenue assumptions have increased the government’s fiscal deficit in 2020.
  • The rating agency has pegged the fiscal deficit at 6.8% for the financial year 2021-22 beginning on April 1.
  • It also says that the financial sector will undergo some credit positive reform because of announcement made under the budget.
  • Further, it says the Banks will benefit from the establishment of an asset reconstruction company to resolve NPAs problem.
  • The public sector banks will also benefit because of ₹20,000 crore capital infusion.
  • The rating agency further believes that the disinvestment target of ₹75 lakh crore is achievable. The statement was made keeping in mind the expectation of strengthening the economic conditions. However, it will be subject to the significant implementation risk.

Moody’s Corporation or Moody’s

It is an American business and financial services company which was founded in 1909 by John Moody. It is the holding company for Moody’s Investors Service (MIS) and Moody’s Analytics (MA).

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