Moody's Investors Service on Tuesday slashed India's growth forecast for the current financial year to 9.3 per cent, from the 13.7 per cent projected earlier, on account of the negative impact of the second wave of Covid-19.
India is experiencing a severe second wave of coronavirus infections which will slow the near-term economic recovery and could weigh on longer-term growth dynamics, it said.
"As of now, we expect the negative impact on economic output to be limited to the April-June quarter, followed by a strong rebound in the second half of the year.
"As a result of the negative impact of the second wave, we have revised our real, inflation-adjusted GDP growth forecast down to 9.3 per cent from 13.7 per cent for fiscal 2021 and to 7.9 per cent from 6.2 per cent in fiscal 2022. Over the longer term, we expect growth of around 6 per cent thereafter," Moody's said.
Read: India might see 'serious livelihood crisis' due to Covid-19, lockdowns, says economist Jean Dreze
On the fiscal front, Moody's expects the renewed surge in the virus to contribute to a marginal shortfall in revenue and a redirection of spending toward healthcare and virus response relative to what the government budgeted in February.
"As a result, we now expect a wider general government fiscal deficit of about 11.8 per cent of GDP in fiscal 2021, compared with our previous forecast of 10.8 per cent and an estimated 14 per cent in fiscal 2020," it added.
Moody's said the combined impact of slower growth and a wider deficit would drive the general government debt burden to 90 per cent of GDP in fiscal 2021, gradually rising to 92 per cent in fiscal 2023.
India is facing the world's worst outbreak of Covid-19, with more than 3 lakh new cases daily being reported for two weeks now, and the new cases reached more than 4 lakh new daily cases over the weekend.
More than 2.49 lakh people in India have died from the virus infection. The public health system is buckling under the weight of surging infections and deaths with several parts of the country reporting shortage of hospital beds, medical oxygen, medicines and vaccines.