Global ratings agency Moody's in its latest report has said that it sees "very gradual improvement in economic activity" of emerging market countries like India, Argentina, Brazil, Mexico, Indonesia, Turkey and South Africa. The ratings agency has revised India's 2020 GDP target and expects the contraction of 8.9% as compared to 9.6% earlier. Moody's has said the scope for additional rate cuts is limited in most emerging market countries, including India, Brazil, Mexico, and Indonesia.
The ratings agency has said the recovery has been patchy in case of India. India's economy had the biggest contraction, 24% year-over-year in the second quarter, as a result of a long and strict nationwide lockdown, it said.
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Restrictions have eased only slowly and in phases, and localised restrictions in containment zones remain, it said. "The steady decline in new and active cases since September, if maintained, should enable further easing of restrictions. We, therefore, forecast a gradual improvement in economic activity over the coming quarters. However, slow credit intermediation will hamper the pace of recovery because of an already weakened financial sector," the ratings agency has maintained.
Citing that the scope for additional rate cuts is limited, the agency has said it does not expect emerging market central banks to carry on with quantitative easing measures once the recovery strengthens.
The ratings agency also maintained that the Indian government and other emerging economies are exploring ways to generate faster growth through reforms, including product and factor market liberalisation. "All in all, the next two years could be defining on the policy front for emerging market countries that choose to use the crisis to unlock new avenues for growth," Moody's said.
India's GDP shrank 8.6 per cent in the quarter ending September, the RBI said in its latest report. In the first quarter, the economy contracted 23.9 per cent. Despite performing poorly in the first two quarters of the current fiscal year, global agencies and economists believe India would bounce back in the fiscal year 2021-2022.
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