Moody’s slashes India’s growth forecast for FY20

NEW DELHI: Moody’s Investors Service on Thursday slashed India’s economic growth forecast to 5.6% for 2019, saying government measures do not address the widespread weakness in consumption demand.

“We have revised down our growth forecast for India. We now forecast slower real GDP (gross domestic product) growth of 5.6% in 2019, from 7.4% in 2018,” it said.

“India’s economic slowdown is lasting longer than previously expected.”

Moody’s had on October 10 slashed India’s economic growth forecast for FY20 fiscal to 5.8% from an earlier estimate of 6.2%.

Last week, it downgraded India’s outlook to negative from stable.

In October, Moody’s had attributed the deceleration to an investment-led slowdown that has broadened into consumption, driven by financial stress among rural households and weak job creation.

In its Global Macro Outlook 2020-21, Moody’s on Thursday said economic activity in India will pick up in 2020 and 2021 to 6.6% and 6.7%, respectively, but the pace to remain lower than in the recent past.

“India’s economic growth has decelerated since mid-2018, with real GDP growth slipping from nearly 8% to 5% in the second quarter of 2019 and joblessness rising. Investment activity was muted well before that, but the economy was buoyed by strong consumption demand. What is troubling about the current slowdown is that consumption demand has cooled notably,” it said.

Moody’s said the Reserve Bank of India has aggressively cut rates this year, and more rate cuts are likely.