Corona effect: Moody's lowers GDP growth forecast, Fitch warns rating

New delhi date. Wednesday 29 April 2020

The Corona crisis is expected to have a detrimental effect on the Indian economy. These fears are also being sealed by the world's rating agencies.

The Fitch rating downgraded India's GDP growth forecast and now Moody's Investors Service has also tweaked it. According to Moody's new forecast, India's GDP growth for calendar year 2020 will be 0.2 per cent. Earlier in March, Moody's had projected GDP growth at 2.5 per cent. Moody's expects India's growth rate to reach 6.2 per cent in 2021.

What did Moody's say?

At the same time, Moody's said in the report that India had extended the lockdown from 21 days to 40 days but now some exemptions have been given in rural areas for agricultural works. The country has ensured that some of their parts are virus free. India has a phased plan to open up different areas. The Moody's report estimates that the G20 countries will have a collective deficit of 5.8 percent. It is estimated that in 2020, China's growth rate could be one percent.

Alerts on Fitch ratings

Global ratings agency Fitch said the rating would come under pressure if weak growth or a slowdown in monetary standards worsened India's financial outlook.

Fitch said the Indian government could announce new stimulus measures in the financial sector to support economic growth while extending the lockdown period. In such a scenario, his rating of India will be assessed in the aftermath of the crisis.

Fiscal policies need to be tightened

Rating agencies say the government may tighten its fiscal policies once the epidemic is under control, but India's record is not good. India's record in achieving fiscal targets and strict adherence to rules has been mixed in recent years.