Moody's Investors Service on Friday slashed its estimate of India's GDP growth during the 2020 calendar year to 2.5 percent from an earlier estimate of 5.3 percent, and said the global coronavirus pandemic will cause unprecedented shock to the global economy.
The estimate for 2020 compares to five percent economic growth in 2019.
In its Global Macro Outlook 2020-21, Moody's said India is likely to see a sharp fall in incomes at the estimated 2.5 percent growth rate, further weighing on domestic demand and the pace of recovery in 2021.
"In India, credit flow to the economy already remains severely hampered because of severe liquidity constraints in the bank and non-bank financial sectors," it said.
Earlier this week, India imposed a three-week-long nationwide lockdown – the most far-reaching measure undertaken by any government – to curb the spread of the coronavirus pandemic that has killed at least 17 people in the country so far.
The lockdown has resulted in the closure of businesses as well as factories and temporary unemployment for thousands of workers. Last week saw the suspension of trains, flights and long distance bus services.
The number of deaths around the world linked to the new coronavirus has crossed over 24,000. In India, over 700 coronavirus cases have been reported so far.
Moody's said the global economy will contract in 2020, followed by a pickup in 2021.
"We have revised our global growth forecasts downward for 2020 as the rising economic costs of the coronavirus shock, particularly in advanced economies, and the policy responses to combat the downturn are becoming clearer," it said.
It now expects real GDP in the global economy to contract by 0.5 percent in 2020, followed by a pickup to 3.2 percent in 2021.
In November last year, before the emergence of the coronavirus, the rating agency was expecting the global economy to grow by 2.6 per cent this year.
"Our forecasts reflect the severe curtailment of economic activity in recent days as the coronavirus has spread throughout the world," it said.
"Lockdowns and other social distancing measures have expanded throughout advanced and emerging market countries," added Moody's.
(Edited by Saheli Sen Gupta)
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