Moody's slashes India's growth estimate to 0.2% for 2020 from 2.5%

Moody's Investors Service has slashed India's growth forecast for the calendar year 2020 to 0.2 per cent, from 2.5 per cent projected in March 2020. For 2021, the rating agency expects India's growth to rebound to 6.2 per cent.

The rating agency earlier cut its projections to 2.5 per cent from 5.2 per cent after Prime Minister Narendra Modi announced a nationwide lockdown on March 24, 2020.

Moody's in its report titled - Global Macro Outlook 2020-21 (April 2020 update) - lowered G-20 advanced economies as a group to contract by 5.8 per cent in 2020. It expects G-20 advanced economies as a bloc to contract by 5.8 per cent in 2020. Even with a gradual recovery, 2021 real GDP in most advanced economies is expected to be below pre-coronavirus levels. China's economy is forecast to grow by 1 per cent in 2020.

The rating agency in its Global Macro Outlook update said, "There are significant downside risks to our forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. Even without longer-duration lockdowns, a self-perpetuating dynamic could take hold, resulting in large-scale destruction of businesses and entire sectors, as well as a structurally high unemployment rate, a permanent loss of human capital, and persistent malaise in consumption and investment."

Moody's has also projected that there are only three countries, namely India, China and Indonesia, who will witness economic growth in 2020.

Moody's said, "India extended a nationwide lockdown to 40 days from 21 days, but relaxed restrictions in rural areas to facilitate agricultural harvesting in the second half of April. The country has determined that many of these areas are free of the virus. India also plans a phased opening of different regions while continuing to carry out identification and contract tracing."

Earlier, a leading credit rating agency, Fitch Ratings, slashed India's economic growth projections to 0.8 per cent in the current fiscal saying an unparalleled global recession was underway due to disruptions caused by the outbreak of Coronavirus, COVID-19, pandemic and resultant lockdowns. In its Global Economic Outlook, Fitch Ratings said India's Gross Domestic Product (GDP) growth will slip to 0.8 per cent for the year April 2020 to March 2021 as compared to an estimated 4.9 per cent growth in the previous fiscal. Growth is, however, expected to rebound to 6.7 per cent in 2021-22.

Similarly, India Ratings & Research believed the contraction may be far steeper at 2.1 per cent if the lockdown is extended beyond May 3.

Nomura, a Japanese brokerage, has predicted India's economy will contract 0.5 per cent, while the Confederation of Indian Industry said the economy may contract by 0.9 per cent.

India earlier lost its tag of being the fastest-growing economy in 2019, when it grew 5.3 per cent against China's 6.1 per cent. It lost the tag to China, which is likely to grow 1 per cent in 2020 and 7.1 per cent in 2021.