After contracting by 7.1 per cent in 2020, India's gross domestic product (GDP) is likely to grow 12 per cent in 2021 as near-term prospects have turned more favourable, Moody's Analytics said.
Hit by the COVID-19 pandemic and the subsequent nationwide lockdown to control the spread of infections, Indian economy contracted by 24.4 per cent in April-June 2020 and 7.3 per cent in July-September quarter of the year. However, GDP growth returned to positive territory in October-December quarter, rising by 0.4 per cent.
A stronger than expected December quarter GDP growth of 0.4 per cent has turned India's near-term prospects more favourable, news agency PTI quoted Moody's Analytics as saying.
"This forecast is equivalent to real GDP, in level terms, growing by 4.4 per cent above pre-COVID-19 levels (as of March 2020) by the end of 2021, or equivalently, by 5.7 per cent above the GDP level in December 2020 by the end of 2021," it said.
Recently, the Organization for Economic Co-operation and Development (OECD) had said it expects India's GDP growth to bounce sharply to 12.6 per cent in FY22, making it the fastest-growing economy in the world. While the Reserve Bank of India has forecasted a 10.5 per cent growth in FY22, the Economic Survey estimated it at 11 per cent.
Moody's Analytics said domestic and external demand have been improving since the easing of lockdown restrictions and added that private consumption and non-residential investment will pick up over the next few quarters and strengthen domestic demand revival in 2021.
Moody's Analytics does not see any additional rate cut by the Reserve Bank of India (RBI) this year, but said some additional fiscal support can be mobilised during the second half of the year, depending on the softness in domestic spending.
"We expect the budget for fiscal 2021-2022 to drive the annual fiscal deficit to nearly 7 per cent of GDP. It includes additional expenditure on infrastructure development, and the associated benefits in the form of employment creation should accrue over the coming quarters," it said.
It also warned against a second wave of coronavirus cases in the country, and said vaccination will be the key to sustaining the domestic recovery.