Rating agency Moody's projects India's GDP to grow by 12% in 2021

American business and financial services company Moody's Analytics has upped India's growth projection for this year and said, India's GDP will grow by 12 per cent in 2021. In an earlier estimate in November 2020, it had said India's GDP will grow at 9 per cent in the calendar year.

Near-term prospects for Asia's third-largest economy have turned more favourable, but the second wave of covid-19 infections is a key risk to recovery, Moody's Analytics said.

In an updated projection released on Thursday, it said India's near-term prospects have turned more favourable following a stronger than expected December quarter when GDP grew by 0.4 per cent over the year following a 7.5 per cent contraction in the September quarter.

Domestic and external demand has been on the mend since the easing of restrictions, which has led to improved manufacturing output in recent months.

Battered by the coronavirus pandemic, the Indian economy is officially projected to contract 8 per cent in FY21, in its worst show in more than four decades. However, most professional forecasters have projected double-digit growth for India in FY22, considered mostly a statistical rebound than a V-shaped recovery.

Last week, the Organisation for Economic Co-operation and Development (OECD) said the Indian economy is expected to grow 12.6 per cent in FY22, the highest among G20 countries.

Earlier this month, Moody's Investors Service, which operates independently of its sister organization Moody's Analytics, had projected the Indian economy to grow 13.7 per cent in FY22. While Moody's Analytics makes calendar year projections, Moody's Investors Service provides fiscal year estimates.

Moody's Analytics said it expects private consumption and non-residential investment to pick up in the next few quarters and strengthen domestic demand revival in 2021. "The strong yearly growth is partially the result of a low base-year comparison. This forecast is equivalent to real GDP, in level terms, growing by 4.4% above pre-COVID-19 levels," it said.

However, a key risk to recovery in 2021 remains a strengthening second wave of COVID-19, it said. The good news is that the resurgence appears to be limited to just a few states, which should increase the chances of containing the spread at an early stage, the report added.