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India’s economy to see record contraction in 2020-21

Published : Monday, 28 September, 2020 at 12:00 AM  Count : 196

NEW DELHI, Sept 27: India's economy may experience a record contraction in the current financial year mainly due to the global Covid-19 pandemic, and the real GDP (gross domestic product) growth is expected to recover from next fiscal onwards, according to a report by global rating agency S&P.
The weak fiscal settings will worsen further this year, constraining the government's ability to aid the economy, it said.
However, it said the country's external settings have improved, helped by the rapid accumulation of foreign exchange reserves.
"We are affirming our 'BBB-' long-term and 'A-3' short-term foreign and local currency sovereign credit ratings on India.
The sovereign credit ratings on India reflect the economy's above-average long-term real GDP growth, sound external profile and evolving monetary settings, it said.
"India's economy will experience a record contraction in fiscal 2021 (year ending March 31, 2021), largely owing to the global Covid-19 pandemic. We expect real GDP growth to recover from fiscal 2021 onwards," the global rating agency said.
India's democratic institutions promote policy stability and compromise, and also underpin the ratings, it said.
The agency added that these strengths are balanced against vulnerabilities stemming from the country's low per-capita income and weak fiscal settings, including consistently elevated general government deficits and indebtedness.
The report further said it may lower the ratings if India's economy recovers significantly slower than the expectation from fiscal 2021 onwards or net general government deficits and the associated accumulation of indebtedness materially exceed our forecasts.
Observing the worsening Covid-19 situation and strict measures to contain it have hit the economy hard, the rating agency said productive capacity has been severely disrupted since the start of the pandemic.    -PTI


















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