Covid outbreak: S&P cuts India’s growth outlook to 5.2%

NEW DELHI: S&P Global Ratings has lowered India’s 2020 growth forecast to 5.2% from 5.7% estimated earlier, citing a global recession resulting from the impact of the Covid-19 pandemic.

In an assessment of the Asia-Pacific region released on Wednesday in Singapore, S&P said India is also among the countries most vulnerable to capital outflows. “An enormous first-quarter shock in China, shutdowns across the US and Europe, and local virus transmission guarantees a deep recession across Asia-Pacific,” said Shaun Roache, chief Asia-Pacific economist at S&P Global Ratings.

Growth across the region would more than halve to 3% in 2020.

It defined recession as at least two quarters of well below trend growth sufficient to trigger rise in unemployment.

While Moody’s revised its forecast for India’s growth to 5.3% in 2020, the Organisation for Economic Co-operation and Development (OECD) downgraded India’s growth to 5.1% for this calendar year.

The Economic Survey released on January 31 had forecast 6-6.5% growth for FY21. India’s economy is forecast to grow 5% in the current year, a 11-year low. “Since our last update, which was on March 3, the spread of the Covid-19 has accelerated, and its economic effect has worsened sharply,” the S&P report said. “Economic data remains scarce, but the longawaited initial figures from China for January and February were much worse than feared.”

The rating agency sharply revised its growth forecast for China to 2.9% in 2020 down from 4.8% earlier.

The global policy response, including the Federal Reserve’s policy-rate cut to zero and the Bank of Japan’s scaled-up asset purchases, will help cushion but not quickly reverse these shocks, it said.

Local measures aiming to support vulnerable sectors and workers may help but their effect will “wane the longer the crisis lasts“.

It further said the timing of a recovery depends, most of all, on progress in containing the viral spread.