India to report strong GDP growth pick up in second half of 2020, says Moody's

Moody's Investors Service on Tuesday said India, China and Indonesia will be the only G-20 emerging economies to post a strong enough pick up of real GDP in the second half of 2020, and retained its projection of 3.1 per cent growth contraction for India in 2020.

"The economic outlook of emerging market countries is more challenging than in advanced economies. In our baseline projections, China, India and Indonesia will be the only G-20 emerging economies to post a strong enough pick up of real GDP in the second half of 2020 and full-year 2021 to end next year above pre-coronavirus levels," Moody's said in the August update of Global Macro Outlook 2020-21.

For 2021 year, Moody's has projected Indian economy to grow 6.9 per cent. The Indian economy grew at the slowest pace in 11 years at 4.2 per cent in 2019-20. Moody's said an economic recovery is underway, but its continuation will be closely tied to the containment of the virus.

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Economic data show a quick rebound in goods consumption in a number of advanced economies. However, pandemic fears will continue to hinder a complete recovery. It projected a 4.6 per cent contraction for G-20 economies in 2020, followed by 5.3 per cent growth in 2021. With the exception of China, we expect economic activity in every G-20 economy to fall this year.

It said in countries with existing banking sector weakness, such as India and Turkey, there is a risk of a self-sustaining negative loop in which adverse real economic developments and bank weakness reinforce each other and harm long-term productive capacity. Moody's said disputes over trade, technology and foreign policy between China and some of its trading partners, including the US, Australia, the UK, Canada and India, have escalated since the start of the pandemic.

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The emphasis of various governments on shoring up domestic productive capacities can also be viewed as an attempt to reduce their co-dependence on the global economy. "Over time, geopolitical tensions between competing powers could exacerbate in a less interdependent world. Asian countries are particularly vulnerable to changes in geopolitical dynamics.

"The rise in tensions between China and countries bordering the South China Sea and clashes on the border with India suggest that geopolitical risks are rising for the entire region," Moody's added.

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