Indian economy to grow by 12% in 2021 as private consumption & non-residential investments pick up – Moody’s

International rating agency Moody’s has upgraded its outlook for the growth of India’s gross domestic product (GDP) from 9% to 12% in the current calendar year due to more positive near-term prospects.

However, the US-based agency has warned that a second wave of Covid-19 infections still poses a major risk to the recovery of Asia’s third-largest economy. According to the outlook, herd immunity against Covid-19 is unlikely to be reached before the end of 2022.

“India’s near-term prospects have turned more favorable following a stronger than expected December quarter, when GDP grew by 0.4% over the year following a 7.5% contraction in the September quarter,” Moody’s Analytics said in an update to its India Forecast.

According to the agency, domestic and external demand has been gradually improving since the pandemic-related restrictions were eased, boosting manufacturing output over recent months.

Last year, the prolonged lockdowns imposed to contain the coronavirus pandemic led to a 7.1% contraction of the world’s fifth biggest economy. The agency expects private consumption and non-residential investment to recover considerably in the next few quarters and strengthen domestic demand revival in 2021.

The strong yearly growth comes partially as a result of a low base-year comparison, according to economist at Moody’s Analytics, Shahana Mukherjee.

“This forecast is equivalent to real GDP, in level terms, growing by 4.4% above pre-Covid-19 levels (as of March 2020) by the end of 2021, or equivalently, by 5.7% above the GDP level in December 2020 by the end of 2021,” the expert said.

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