Moody's Investors Service said on Tuesday that India's economy will rebound in the current financial year to mark a growth of 9.3 percent but the second Covid-19 wave has increased risks to the country's outlook with potential longer-term credit implications,
The economy rebounded quickly from a steep contraction in 2020, it said. But risks to India's credit profile including a persistent slowdown in growth, weak government finances and rising financial sector risks have been exacerbated by the shock of coronavirus second wave.
"We expect a decline in economic activity in the April to June quarter followed by a rebound, resulting in real, inflation-adjusted GDP growth of 9.3 percent in the fiscal year ending March 2022 (fiscal 2021) and 7.9 percent in fiscal 2022," said Moody's.
A small shortfall in budgeted revenue and a redirection of spending toward the response to the pandemic will result in a general government fiscal deficit of 11.8 percent of GDP and a rise in the general government debt burden to 90.3 percent of GDP in fiscal 2021. Debt-to-GDP will edge up to 92 percent by fiscal 2023, largely driven by relatively slow economic growth. Moody's said India's financial sector is the main driver of potential event risk to the sovereign.
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