Even as the government announced a slew of measures to boost growth, the impact may only be seen with a lag, global rating agency Moody’s Investors Service said. For now, there is an increasing risk that the economic growth will remain materially lower than the past, Gene Fang, associate MD, Sovereign Risk Group at Moody’s Investors Service, told TV news channels adding that the structural concerns are expected to persist longer. The rating outlook partly reflects government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden from already high levels, Moody’s said in its report. The rising debt is one of the major concerns for the Indian economy, Gene Fang also said. When compared to its peers in the ‘Baa’ level category, India has a very high debt to GDP ratio, he said. For India, it stands at 67 percent, the peers have it in 50 percent range, he also said.
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Moody’s expected India to grow at 6.6 per cent in 2020. “Our rationale points to some deeply embedded structural issues in the economy and also the emergence of credit crunch coming out of the NBFC sector,” Gene Fang told ET Now. On what the government can do to eliminate the risks, he said that financial stress in the agriculture sector and certain weak links in the labour market are hindering growth. The government is likely to miss its fiscal target for the fiscal year, he added.
“The prospects of further reforms that would support business investment and growth at high levels, and significantly broaden the narrow tax base, have diminished,” Moody’s said in its report. The global rating agency affirmed the Baa2 foreign-currency and local-currency long-term issuer ratings for India.