Moody’s said recovery will gather pace in the third quarter of fiscal 2021 (Q3FY21) as the lifting of lockdown releases pent-up demand and helps to normalise economic conditions.
Referring to the growth trajectory, Kaustubh Chaubal, a Moody’s Vice President and Senior Credit Officer, said the economic slowdown is exacerbating existing challenges. This is particularly so in sectors vulnerable to declining consumption and resource price volatility, such as in the automotive, oil & gas, mining, and steel sectors.
India’s Gross Domestic Product (GDP) contracted 24 per cent year on year for the three months to June 2020. It was the sharpest decline among major economies and it will post its first full-year contraction in 40 years in the fiscal year ending March 2021.
Even with the expectation of recovery gathering pace from Q3FY21, aggregate revenue in fiscal 2022 will still continue to be seven per cent short of the level in fiscal 2020, before the coronavirus pandemic.
Moody’s expects unit sales of passenger and commercial vehicles to fall 20% in fiscal 2021 from a year ago. The low oil and gas prices, weak refining margins and reduced demand for transport will weigh on oil & gas companies.
Volatile commodity prices and elevated debt levels will constrain a meaningful improvement in credit metrics for miners and steelmakers.
Conversely, credit trends for IT services and telecommunications companies remain neutral.
Despite the challenges, refinancing risk remains manageable for most companies, supported by their good relationships with banks and track record of access to capital markets, Moody’s said.