The Indian economy is expected to clock a growth of 13.7% in FY’22, registering a strong rebound from a 7% contraction this fiscal, on the back of normalisation of activity and growing confidence in the market with the rollout of Covid-19 vaccine, Moody’s Investors Service said on Thursday.

The agency in its earlier estimates had predicted India's GDP to shrink 10.6 per cent in the current financial year.

In its 'Global Macro Outlook 2021-22 (February 2021 Update)', Moody's said India's Economy has rebounded quickly from one of the world's longest and most stringent lockdowns, which also came with the steepest fall in GDP in the second quarter of 2020.

"Our current expectation is that in the current fiscal ending March 2021, the economy would contract 7%. We expect a rebound of 13.7% growth in the next fiscal on the normalisation of activity and base effects," said Moody's Investors Service Associate Managing Director (Sovereign Risk) Gene Fang.

The very large rebound incorporates the view that recovery in market activity will continue, with the rollout of vaccines and growing confidence of normalisation of processes, Fang said in an online conference on India Credit Outlook 2021 organised by Moody's and its India affiliate ICRA.

According to Moody's, the central government's fiscal deficit for FY2021 and FY2022 should be lower than projected, supported by stronger revenue generation in the fourth quarter of FY2021 and higher nominal GDP growth in fiscal 2022.

The government will release the GDP numbers for the October-December quarter of the current fiscal on Friday. Many agencies are expecting the economy to record positive growth in the third quarter of the financial year.