Moody's Investors Service on Tuesday slashed India's growth forecast for the current financial year to 9.3% from an earlier projection of 13.7 percent saying that the second wave of Covid infections hampers economic recovery and increases risk of longer-term scarring. Moody's has also denied any chances of a sovereign upgrade in near future.

The rating agency, which has a 'Baa3' rating on India with a negative outlook, said obstacles to economic growth, high debt and weak financial system constrain sovereign credit profile. The US-based rating agency had in February forecast a 13.7% economic growth for the current fiscal (April 2021-March 2022).

As per official estimates, the Indian economy contracted 8% in the previous fiscal ended March 2021. "India is experiencing a severe second wave of coronavirus infections which will slow the near-term economic recovery and could weigh on longer-term growth dynamics. "The surge of the virus, which has been driven by a highly contagious variant, has put significant strain on India's healthcare system with hospitals overrun and medical supplies in short supply," Moody's said.

Stating that the second wave of coronavirus infections hampers economic recovery and increases risk of longer-term scarring, Moody's said the reimposition of lockdown measures will curb economic activity and could dampen market and consumer sentiment. However, it does not expect the impact to be as severe as during the first wave.

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