India to clock 13.7% growth in FY’22, contract 7% this fiscal: Moody’s

New Delhi: The Indian economy is expected to clock a growth of 13.7 per cent in FY’22, registering a strong rebound from a seven per cent contraction this fiscal, on the back of normalisation of activity and growing confidence in the market with the rollout of COVID-19 vaccine, Moody’s Investors Service said Thursday. Moody’s Investor Services had in November last year projected Indian economy to contract 10.6 per cent in the current fiscal and return to growth of 10.8 per cent in 2021-22 fiscal.

“Our expectations in current fiscal year ending March 2021 are for a contraction of 7 per cent significant improvement from our … (earlier) forecast of contraction of over 10 per cent. We try to incorporate some of the unexpected pickup in activity that we have seen recently,” Moody’s said.

“For the year following that we expect a rebound of 13.7 per cent that reflects largely normalisation of activity, a pronounced base effect. Recovery of activity reinforced by some degree of rollout of vaccine, and growing confidence in market that things are getting more back to normal,” Moody’s Investors Service associate MD (Sovereign Risk) Gene Fang said in an online conference organised by Moody’s and its India affiliate ICRA on India Credit Outlook 2021.

Fang said reform implementation remains a challenge in India, and expressed uncertainty over revenue generation through CPSE privatisation announced in the Budget saying such ‘one-off monetisation policies are less durable in terms of supporting fiscal health for long term’.

Stating that recession in India has ended, ICRA principal economist Aditi Nayar said Indian economy could clock a 0.3 per cent growth in the October-December quarter of the current fiscal.

Indian economy contracted for two consecutive quarters of June and September this fiscal, thereby entering into recession. Contraction was 23.9 per cent and 7.5 per cent respectively.

ICRA expects Indian economy to contract 7 per cent in current fiscal and growth to rebound to 10.5 per cent in the next fiscal beginning April 1.

Nayar said there could be upside to growth in FY’22 if government’s capital expenditure increases, budget announcements are implemented and vaccination drives are carried out.

The Economic Survey had projected Indian economy to contract 7.7 per cent in current fiscal and growth to rebound to 11 per cent next fiscal.