Moody's Investors Service today slashed India's economic growth forecast to 5.6 per cent for 2019 from 7.4 per cent in 2018, saying the government does not address the widespread weakness in consumption demand. The slowdown is ‘lasting longer’ than expected, it said. It had last month slashed such forecast for fiscal 2019-20 to 5.8 per cent from 6.2 per cent.
Last week, the rating agency downgraded India's outlook to negative from stable.Moody's Investors Service today slashed India's economic growth forecast to 5.6 per cent for 2019 from 7.4 per cent in 2018, saying the government does not address the widespread weakness in consumption demand. The slowdown is 'lasting longer' than expected, it said.It had last month slashed such forecast for fiscal 2019-20 to 5.8 per cent from 6.2 per cent.#
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, according to a news agency report.
In its Global Macro Outlook 2020-21, Moody's said economic activity in India will pick up in 2020 and 2021 to 6.6 per cent and 6.7 per cent respectively, but the pace will remain lower than in the recent past.
"India's economic growth has decelerated since mid-2018, with real GDP growth slipping from nearly 8 percent to 5 percent 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.
"None of these [government] measures directly address the widespread weakness in consumption demand, which has been the chief driver of the economy," it said.
The Reserve Bank of India has aggressively cut rates this year, and more rate cuts are likely, it said.
"Benign domestic inflationary pressures, subdued oil prices and easing in other parts of the world will allow the central bank to continue to pursue an accommodative monetary policy stance. However, the transmission to lending rates continues to be hindered by the credit squeeze caused by a disruption in the non-bank financial sector," it added.
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