Rating agency Moody’s Investors Service estimates that the Indian economy may see a decline in 2020-21. This will be the first time in four decades that the ongoing ‘lockdown’ to prevent the corona virus pandemic will lead to a decline in the domestic economy facing challenges due to reduced consumption and slowing down of business activity. On the other hand, RBI has also predicted GDP growth to be negative.
Real growth in GDP growth rate
According to Moody’s, even before the Corona virus crisis, the growth rate of India’s economy had slowed down and reached the lowest rate of six years. The steps taken by the government in the economic stimulus package are not in line with expectations, the problems of the economy are much broader than this. Moody’s said in its report, “We now anticipate that there will be a real decline in the GDP growth rate of the Indian economy in FY 2020-21.” Earlier we had predicted the growth rate to be zero.
The country’s economy will improve in 2021-22
However, Moody’s expected the country’s economy to improve in 2021-22. It may also be stronger than its predecessor forecasting a growth rate of 6.6 percent. The report states that the Kovid-19 lockdown is likely to have a profound impact on the Indian economy. This will affect both the public and private sector. The lockdown was announced on 25 March in the country. Since then its duration has been extended four times with concessions. The fourth lockdown will remain in force until 31 May.
Also read: GDP growth projected to be negative in first half of 2020-21
The lockdown has led to a crisis especially in the unorganized sector of the country. The sector contributes more than half of GDP. Regarding the economic stimulus package, Moody’s said, “The government’s direct fiscal stimulus can be in the range of one to two percent of GDP. Most of Sircar’s schemes are related to loan guarantees or to address the cash concerns of the affected areas. “Directly the amount of financial spending is far below our expectations and it is less likely to give growth momentum.”