Moody’s cuts India’s FY20 growth forecast to 5.8%

Moody’s Investors Service on Thursday cut India’s gross domestic product (GDP) growth forecast for 2019-20 to 5.8% from the earlier estimate of 6.2%. It attributed the deceleration to an investment-led slowdown that has broadened into consumption, driven by financial stress among rural households and weak job creation.“The drivers of the deceleration are multiple, mainly domestic and in part long-lasting,” the ratings agency said in its report.It expects growth to pick up to 6.6% in FY21 and around 7% over the medium term.Highlighting the diminished probability of sustained real GDP growth at or above 8%, it said: “What was an investment-led slowdown has broadened into consumption, driven by financial stress among rural households and weak job creation. A credit crunch among non-bank financial institutions (NBFIs), major providers of retail loans in recent years, has compounded the problem”.India’s economic growth slumped to a six-year low of 5% in the April-June quarter and, according to the Reserve Bank of India (RBI), is likely to be near this trough at 5.3% in the July-September quarter.The central bank had last week cut the country’s growth forecast for FY20 to 6.1% from 6.8% estimated earlier.Moody’s noted that prolonged softer growth would dampen prospects for the government’s fiscal consolidation plans and hamper its ability to prevent a rise in the debt burden.With the recently announced corporate tax cuts and lower nominal GDP growth, it expects a central government deficit of 3.7% of GDP in 2019-20, marking a 0.4 percentage point slippage from its target.

from Economic Times https://ift.tt/321ns4F