The Indian economy will experience a record contraction in the fiscal year to March 2021 on account of the global COVID-19 pandemic but real GDP will recover significantly in FY22, rating agency Standard and Poor’s said on Friday.
S&P affirmed its rating on India’s long-term foreign and local currency sovereign credit at the lowest investment-grade level and retained its stable outlook on the economy.
India’s long-term rating was affirmed at ‘BBB-‘ with a stable outlook while the short-term rating was held at ‘A-3’.
“The stable outlook reflects our expectation that India’s economy will recover following the resolution of the COVID-19 pandemic, and that the country’s strong external settings will act as a buffer against financial strains despite elevated government funding needs over the next 24 months,” S&P said.
India has the second highest virus cases globally despite seeing one of the strictest of lockdowns and cases are still rising as the economy gradually opens up.
“We expect economic activity in India to begin to normalize in fiscal 2022, resulting in real GDP growth of about 10 per cent.”