Moody's calls stimulus measures positive, revises GDP forecast upwards

Lowers the contraction rate for India's gross domestic product to 10.6 per cent for 2020-21 from earlier 11.5 per cent

Moody’s Investors Service has lowered the contraction rate for India’s GDP to 10.6 per cent for 2020-21 from 11.5 per cent earlier. It also revised upwards its expectation for GDP growth to 10.8 per cent for 2021-22 from earlier 10.6 per cent.

Meanwhile, Barclays raised its projections for GDP growth to 8.5 per cent during 2021-22 from its earlier forecast of 7 per cent. Earlier, it had raised its projection for GDP contraction to 8.5 per cent from earlier 8 per cent for FY21. 

Moody’s said the stimulus measures announced last week by Finance Minister Nirmala Sitharaman were aimed at increasing manufacturing competitiveness and creating jobs, while supporting infrastructure investment, credit availability to stressed sectors.

“As such, they present potential upside to our current forecasts, a credit positive,” Moody's said in a statement. The revisions in GDP came over 10 days ahead of the release of GDP data for Q2.  Last week, Moody’s cut the fall in GDP to 8.9 per cent from 9.6 per cent earlier for the calendar year 2020.