The rating firm joins a number of major banks and rating agencies, which have made deep cuts in their forecasts for the Indian economy following a 23.9% contraction in April-June as spending on consumers, private investment and exports collapsed during one of the world’s tightest lockdowns. .
S & P’s latest review comes three months after it projected India’s real GDP for fiscal 2021.
“While India eased the lockdowns in June, we believe that the pandemic will continue to restrict economic activity … As long as the spread of the virus remains uncontrolled, consumers will be cautious about exiting and spending and businesses will be under pressure,” S&P said in a note.
“The potential for further monetary support is held back by concerns about inflation in India,” said Vishrut Rana, Asia-Pacific economist at S&P Global Ratings. The Reserve Bank of India has cut official rates by 115 basis points so far this year.
Retail inflation data, to be released later in the day, is likely to have remained above the Reserve Bank of India’s medium-term target range in August for the fifth consecutive month, according to a Reuters poll.
India’s high deficit also limits the scope for further fiscal stimulus, S&P added. It expects GDP growth of 6% in fiscal 2022 and 6.2% in fiscal 2023.
Moody’s said on Friday that it expected India’s real GDP to contract 11.5% in fiscal 2020.
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