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India’s GDP to decline to 2.5% from estimated 5.3% in 2020: Moody’s

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Moody’s Investors Service has slashed its estimate of India’s economic growth forecast to 2.5% during the 2020 calendar year from an earlier estimate of 5.3% amid the rising economic cost of the coronavirus pandemic.

Moody’s said it expects the growth to bounce back to 5.8% in the calendar year in 2021 and expects a gross domestic product (GDP) growth of negative 0.5% in CY20 at the global level, before bouncing back in CY21.

 “The governments of India (Baa2 negative) and South Africa (Baa3 negative) have announced 21-day lockdowns. We expect these measures to dampen economic growth in both countries this year. For India, we are now projecting growth rates of 2.5% in 2020 followed by 5.8% next year,” Moody’s said in its Global Macro Outlook.

“In India, credit flow to the economy already remains severely hampered because of severe liquidity constraints in the bank and non-bank financial sectors,” it said.

The government had earlier projected GDP growth at 5% in 2019-20 as compared to 6.1% in 2018-19. Q3 had witnessed a 4.7% growth.

Notably, the RBI on Friday slashed the repo rate by 75 basis points and permitted banks to allow a three-month moratorium on payment of EMIs on all term loans that were outstanding on March 1.

India on Thursday announced Rs1.7 lakh crore coronavirus relief package focused on additional food transfers at no cost, cash for vulnerable segments, concessions on government schemes aimed to help households reduce their expenditure, and support those on the frontline of the battle against the pandemic.