India's economic growth is expected to rebound strongly in the next financial year, credit rating agency Moody's has said. It has pegged the gross domestic product (GDP) to grow at 9.3% in 2022 and 7.9% in the fiscal year 2023 (ending March 31), respectively.
Moody's analyst Sweta Patodia said that the rising rate of vaccination against Covid-19 in India will support a sustained recovery in economic activity. India has so far administered over 1.19 billion vaccine doses to eligible beneficiaries. The Modi government is currently working towards fully inoculating the entire eligible population by the end of this year.
"Consumer demand, spending and manufacturing activity is recovering following the easing of pandemic restrictions. These trends, including high commodity prices, will propel significant growth in rated companies’ EBITDA over the next 12-18 months," Patodia further said, as per Moody's report.
Even though daily infections in India have been on a decline, the credit rating agency warned that if a new wave of the pandemic was to occur, it can trigger fresh lockdowns and erode consumer sentiment. “Such a scenario would dampen economic activity and consumer demand, potentially leading to subdued Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) growth of less than 15%-20% for Indian companies over the next 12-18 months,” the report added.
Moody's also highlighted a few other factors which will boost the country's economic growth. It said that growing government spending on infrastructure will support demand for cement and steel. On the other hand, new investments will be supported by rising consumption, domestic manufacturing and benign funding conditions.
In its October report, Moody's affirmed India's sovereign rating and upgraded the country's outlook to 'stable' from 'negative', citing receding downside risks to the economy and financial system. The sovereign rating stood at 'Baa3' -which is the lowest investment grade.