S&P Global Ratings has revised the growth forecast of India for the financial year 2021-22 from 10% to 11%. This growth will be led by an expansionary fiscal policy aimed at boosting domestic private spending.
Key Points
- After a contraction in two consecutive quarters, the Indian economy grew 0.4% in the October-December quarter.
- During April-June, at the peak of pandemic and most economic activities at a standstill, the country’s GDP had contracted a massive 23.9%, following a 7.5% decline in the fiscal second.
- The US credit rating agency said a three-speed recovery pattern has emerged in Asia-Pacific.
- New Zealand, China, Vietnam, and Taiwan lead the group where activities are already above pre-pandemic levels. Korea, Australia, and Japan are in the middle group where activities should reach pre-pandemic levels in early to mid-2021. India has joined the group following a sharp rebound in recent months.
- Gradual vaccine coverage in the region encourages a virtuous cycle of higher spending on services, more jobs, and rising incomes to power the next leg of the recovery.
The rating agency is of the view that emerging market economies should withstand rising U.S. bond yields, as they reflect reflation and economic healing, and not a monetary shock in the style of the 2013 taper tantrum. It has also raised the 2021 growth forecast for China to 8% from 7% on stronger-than-expected exports and lingering momentum in the property market. Countries including the Philippines, Malaysia, and Thailand, will see a delayed but not derailed recovery.
