Global ratings agency Moody's Investor Services on Monday reduced its calendar year 2020 economic growth forecast for India to (-)3.1 per cent, from its earlier projection of (+)0.2 per cent.
It said that effects of lockdowns on Q2 activity will be larger than previously thought.
"Incoming data show the extent of coronavirus-related disruption in Q1 and Q2," a report by Moody's Investor Services said.
"As a result, we have revised down our 2020 growth forecasts for Germany (Aaa stable), France (Aa2 stable), Italy (Baa3 stable), the UK (Aa2 negative), Canada (Aaa stable), Brazil (Ba2 stable), India (Baa3 negative), Indonesia (Baa2 stable), Saudi Arabia (A1 negative) and Argentina (Ca negative)."
The ratings agency predicted a rise in real GDP growth to 6.9 per cent for 2021.
On June 1, the credit ratings agency downgraded India's sovereign ratings as it saw challenges being piled upon the country's policymaking institutions to mitigate the risks of a sustained period of relatively low growth.
Besides, Moody's said the COVID-19 pandemic amplified vulnerabilities in India's credit profile such as slower growth relative to the country's potential, rising debt and further weakening of debt affordability and persistent stress in parts of the financial system.
Consequently, Moody's downgraded India's foreign-currency and local-currency long-term issuer ratings to Baa3 from Baa2.
It also downgraded India's local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2.
Furthermore, it kept the outlook as negative. Currently, the sovereign rating assigned to India is Baa3 with a negative outlook.