'Geopolitical risks': India's economy to contract 3.1% in 2020, says Moody's

Credit rating agency Moody's has said India's economy will shrink 3.1 per cent this year.

The agency had pegged India's growth at 0.2 per cent in April amid the pandemic. Moody's said it expects India's economy to register 6.9 per cent growth next year.

As the coronavirus pandemic continues to hit major economies, Moody's also downgraded G20 advanced economies projecting a contraction of 6.4 per cent in 2020, but said that they will grow at 4.8 per cent next year.

Moody's had earlier cut India's credit rating to investment grade 'Baa3' due to lack of implementing policies to boost growth.

"April-June quarter of 2020 will go down in history as the worst quarter for the global economy since at least World War II. We continue to expect a gradual recovery beginning in the second half of the year, but that outcome will depend on whether governments can reopen their economies while also safeguarding public health," it said.

The agency said that COVID-19 pandemic will push debt levels in the world's richest nations up by almost 20 percentage points on average this year.

"We estimate that on average in this group, government debt/GDP ratios will rise by around 19 percentage points, nearly twice as much as in 2009 during the great financial crisis," it stated.

"Compared with the GFC, the rise in debt burdens will be more immediate and pervasive, reflecting the acuteness and breadth of the shock posed by the coronavirus".

Moody's had singled out China as the only country in G20 to grow during the pandemic forecasting a 1 per cent growth with 7.1 in 2021.

However, it cautioned, saying: "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."