Moody's Revises India's FY20-21 GDP Contraction to (-)10.6%
Moody's Investor Service on Thursday revised the contraction rate of India's FY20-21 GDP to (-) 10.6 per cent from an earlier estimate of (-) 11.5%.
 
The revision comes days after the Centre announced new stimulus measures.
 
Besides, Moody's revised the forecast for the next financial year ending March 2022.
 
It now estimates a growth of 10.8% from a rise of 10.6%, which was predicted earlier.
 
"The latest measures (stimulus) aim to increase the competitiveness of India's manufacturing sector and create jobs, while supporting infrastructure investment, credit availability and stressed sectors," Moody's said.
 
"As such, they present potential upside to our current growth forecasts, a credit positive."
 
According to the ratings agency, consumer confidence in India remains relatively low amid a continued elevated number of daily new coronavirus cases, "although this has come down from a peak in September".
 
"Stronger nominal GDP growth over the medium term would make it easier for India's government to address its weak fiscal position, which the coronavirus has exacerbated; we forecast government debt to increase to 89.3% of GDP in fiscal 2020 and decline to 87.5% in fiscal 2021, from an already elevated 72.2% in fiscal 2019," Moody's said.
 
"By contrast, we forecast the median for Baa-rated peers to rise to 60.8 per cent in 2020. The country's mixed track record on revenue-raising measures lowers prospects for fiscal policy-driven budget consolidation. A sustained increase in GDP growth would therefore likely be a major driver of any durable future fiscal consolidation."
 
Accordingly, the global ratings agency expects the general government fiscal deficit to remain wide, reaching around 12% of GDP, with some upside risk, in fiscal 2020 and narrowing to about 7% of GDP over the medium term, still above the deficit of 6.5% of GDP in 2019.
 
Furthermore, the agency cited that new measures target manufacturing competitiveness.
 
The latest package follows the Rs467 billion (0.2% of GDP) of stimulus announced in October and close to Rs2 trillion (1% of GDP) of direct spending allocated in the government's first stimulus package in May.
 
The government expects that no new borrowing will be required to fund the additional spending.
 
Among the new measures, the government has allocated Rs1.5 trillion to extend the Production Linked Incentive (PLI) scheme across a further 10 sectors, including automotive and advance cell chemistry manufacturers.
 
Under the Scheme, manufacturers in key sectors will receive incentives in the form of direct payments over five years.
 
The Scheme aims to increase the competitiveness of India's manufacturing sector, potentially reviving private investment, where year-on-year growth has been trending downward since the second quarter of 2018.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    FM Nirmala Sitharaman Makes 12 Announcements under Atmanirbhar Bharat 3.0 with a Stimulus Size of Rs2.65 Lakh Crore
    While claiming that the Indian economy is witnessing a strong recovery, finance minister (FM) Nirmala Sitharaman on Thursday made 12 announcements under the Atmanirbhar Bharat 3.0 with a stimulus size of Rs2.65 lakh crore or 15% of the national gross domestic product (GDP).
     
    Addressing the media in New Delhi, Ms Sitharaman cited several data, including the growth in composite purchase managers index (PMI), collections under goods and services tax (GST), foreign direct investment (FDI) inflow and the stock markets' recent surge to record highs to show a strong revival of the Indian economy.
     
    She also said that bank credit has grown by 5.1%. FDI inflows during April-August 2020 stood at $35.37 billion, 13% higher than in the same period last year.
     
     
    Here are the announcements made by FM Sitharaman under Atmanirbhar Bharat 3.0... 
     
    1. 'Atmanirbhar Bharat Rozgar Yojana' is being launched to incentivise creation of new employment opportunities during the COVID recovery phase.  
     
     
     
    2. Emergency Credit Line Guarantee Scheme will be extended till 31 March 2021. The scheme covers micro, small and medium enterprise (MSME) units, business enterprises, individual loans for business purposes and Micro Units Development and Refinance Agency (MUDRA) borrowers.
     
     
    3. Production-linked Incentive (PLI) worth Rs1.46 lakh crore is being offered to 10 champion sectors that will help boost competitiveness of domestic manufacturing. It will give a big boost to economy, investment, exports and job creation. 
     
     
    4. PM Awaas Yojana (PMAY) for the urban segment. Under this scheme, Rs18,000 crore will be provided over the budget estimates (BE) for 2020-21 for PMAY-Urban through additional allocation and extra budgetary resources. This will help 1.2 million houses to be grounded and 1.8 million houses to be completed.
     
     
    5. Relaxation of earnest money deposit (EMD) and performance security on government tenders. To provide ease of doing business and relief to contractors, EMD for tenders will be replaced by bid security self-declaration. This relaxation is valid till 31 December 2021, the FM said.
     
     
    6. Income-tax Relief for Developers & Home Buyers. The finance minister says, the differential between circle rate and agreement value in real estate income-tax (I-T) would be increased to 20% from 10% and this would remain valid till 30 June 2021. The income tax relief provides incentive to middle class to buy homes, she added.
     
     
    7. Government will make Rs6,000 crore equity investment in debt platform of National Investment and Infrastructure Fund (NIIF), which will help NIIF raise Rs1.1 lakh crore by 2025 for financing infrastructure projects, the finance minister says.
     
     
    8. Fertilizer subsidy worth Rs65,000 crore will be provided to farmers to ensure that the forthcoming crop seasons will not be affected for want of adequate fertilizers, the finance minister announced.
     
     
    9. Enhanced outlays under PM Garib Kalyan Rozgar Yojana. Under this scheme, FM Sitharaman says, an additional outlay of Rs10,000 crore is being provided. These funds can be used for Mahatma Gandhi National Rural Employment Guarantee (MGNREGA) or for Gram Sadak Yojana, and would accelerate growth of the rural economy, she added.
     
     
    10. Boost for Project Exports. According to Ms Sitharaman, Rs3,000 crore will be released to EXIM Bank for promotion of project exports through lines of credit under the IDEAS Scheme.
     
     
    11. Rs10,200 crore additional budget stimulus will be provided towards capital and industrial expenditure for domestic defence equipment, industrial incentives, industrial infrastructure and green energy, the FM announced.
     
     
    12. Rs900 crore will be provided for COVID Suraksha Mission for research & development of Indian COVID-19 vaccine to the department of biotechnology (DBT). The actual cost of the vaccine or the logistics required for distributing the vaccine is a totally different matter, Sitharaman clarified.
     
     
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    COMMENTS

    Ramesh Popat

    2 weeks ago

    inflation just released, sky rocketing! fd rates at bottom!
    any remedy to common man for that - at all? farmers, companies,
    start ups, BPLs all benifited but common man is suffering boss!

    India Enters into Technical Recession for the First Time: RBI Report
    India has technically entered into a recession with a likely contraction in its GDP (gross domestic product) during the July-September period, according to a report by the Reserve Bank of India (RBI).
     
    RBI's Economic Activity Index estimates that India's GDP growth for the second quarter of the current financial year was negative and the GDP contracted by 8.6% during the quarter.
     
    "India has entered into a technical recession in the first half of 2020-21 for the first time in its history with Q2:2020-21 likely to record the second successive quarter of GDP contraction," it said.
     
    The contraction is ebbing with gradual normalisation in activities and expected to be short-lived.
     
    The RBI report said that at a time when global economic activity is besieged by the outbreak of the second wave of COVID-19, incoming data for the month of October 2020 have brightened the near-term outlook for the Indian economy and stirred up consumer and business confidence.
     
    "Since the assessment of the performance of the Indian economy in the first half of 2020-21 that was presented in the Monetary Policy Report of October 2020, several developments point to a window of respite opening up and an unshackling of economic activity from the grip of Covid-19 as the festival season sets in," it said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    Ramesh Popat

    2 weeks ago

    second wave will be more challenging- in all respect!

    REPLY

    arsudhindra

    In Reply to Ramesh Popat 2 weeks ago

    Yes u r right...the ppl shld abide the SOPs else no use how many lockdowns its levyied!

    arsudhindra

    2 weeks ago

    But there isnt any presser from RBI Governor yet! why jump to negativity, when we have awesome GST collections, 2/3/4 wheelers have bumper sales, UPI transactions breaking all records!!!

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