Bad news: Moody’s cuts 2019 GDP forecast to 6.2 pct

By: |
Published: August 24, 2019 1:11:33 AM

The global agency has revised its growth forecast for 16 Asian economies on grounds of weaker trade and investment despite stable private and public consumption.

Earlier this month, the Reserve Bank of India (RBI) had also flagged growth concerns and lowered its GDP expansion estimate for the current financial year to 6.9% from 7% earlier, citing demand and investment slowdown.

Moody’s Investors Service on Friday trimmed India’s GDP growth projection for the calender year 2019 by as much as 60 basis points from its earlier forecast to just 6.2%, citing a combination of factors such as weak hiring, distress among rural households and stress in the shadow-banking sector. For 2020, too, it has cut the forecast by 60 basis points to 6.7%.

The downward revision came just hours before finance minister Nirmala Sitharaman announced a slew of measures, including the rollback of an increase in the super-rich surcharge and upfront recapitalisation of state-run banks, to reverse sliding growth. Already, GDP growth collapsed to a five-year low of 5.8% in the March quarter. Moody’s said the Indian economy had expanded by 6.9% in 2017 and 7.4% in 2018.

The global agency has revised its growth forecast for 16 Asian economies on grounds of weaker trade and investment despite stable private and public consumption.

“While not heavily exposed to external pressures, India’s economy remains sluggish on account of a combination of factors, including weak hiring, financial distress among rural households, and tighter financing conditions due to stress among non-bank financial institutions,” it said. “Cooler business sentiment and slow flow of credit to corporates contribute to weaker investment in India,” it added.

Earlier this month, the Reserve Bank of India (RBI) had also flagged growth concerns and lowered its GDP expansion estimate for the current financial year to 6.9% from 7% earlier, citing demand and investment slowdown. Moody’s said inflation was expected to rise to 3.7% this year and 4.5% in 2020, compared with 2.9% in 2018. “Reserve Bank of India has been most active in cutting rates in support of growth, but lingering financial sector issues may blunt the effectiveness of the monetary stimulus,” it added.

Do you know What is Centrally Sponsored Scheme, Non Tax Revenue, Non Debt Capital Receipts, Consolidated Fund of India, Disinvestment? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Forex reserves slip marginally by USD 70.8 million to USD 430.5 billion
2CSR violations not to be treated as criminal offence, says Nirmala Sitharaman
3Nirmala Sitharaman’s economy booster; FPI surcharge, income tax, other relief for businesses, investors