India’s GDP Growth to Recover from Fiscal 2021: S&P

India’s economy may experience a record contraction in the current financial year mainly due to the global Covid-19 pandemic, and the real GDP growth is expected to recover from next fiscal onwards, according to a report by gobal rating agency S&P. The report observed that the country’s external settings have improved, helped by the rapid accumulation of foreign exchange reserves. The stable outlook reflects that India’s contraction in fiscal 2021 will be followed by a significant recovery, which will stabilise the country’s broader credit profile. The sovereign credit ratings on India reflect the economy’s above-average long-term real GDP growth, sound external profile and evolving monetary settings, it said. “India’s economy will experience a record contraction in fiscal 2021 (year ending March 31, 2021), largely owing to the global Covid-19 pandemic. We expect real GDP growth to recover from fiscal 2021 onwards, “as per the global rating agency. The agency added that these strengths are balanced against vulnerabilities stemming from the country’s low per-capita income and weak fiscal settings, including consistently elevated general government deficits and indebtedness. Observing that India’s worsening Covid-19 situation and the strict measures to contain it have hit the economy hard, the rating agency said productive capacity has been severely disrupted since the start of the pandemic. While India’s economy continues to outperform peers at a similar level of income on a 10-year weighted average real GDP per-capita basis, its performance on this metric has weakened somewhat. The government’s ability to deliver and execute additional economic reforms, especially those that spur investment and job creation, will be important for India’s ability to recover from the economic slowdown. The fresh fiscal revenue generating measures will be difficult to implement in the face of the current downturn.