Slower recovery: Moody’s cuts India growth estimates

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Published: February 18, 2020 6:30:39 AM

In December, Moody’s had lowered its GDP growth projection for India by 90 bps to 4.9% for the financial year 2019-20.

Moody's has revised global growth forecasts down by 20 bps to 2.4% for 2020.Moody’s has revised global growth forecasts down by 20 bps to 2.4% for 2020.

Moody’s Investors Service on Monday cut its India GDP growth forecast for 2019 (calender) by 60 bps to 5% and by a sharper 120 bps to 5.4% for 2020, in what reflected a continuing trend of such downward revisions by prominent domestic and foreign agencies.

While the economy may well begin to recover in the current quarter, we expect any recovery to be slower than we had previously expected. Accordingly, we have revised our growth forecasts to 5.4% for 2020 and 5.8% for 2021, down from our previous projections of 6.6% and 6.7%, respectively,” Moody’s said in its latest Global Macro Outlook report.

India’s economy has decelerated rapidly over the last two years as real GDP grew at just 4.5% in Q3 2019, it said. “A key to stronger economic momentum would be the revival of domestic demand, both rural and urban. But equally important is the resumption of credit growth in the economy,” it added.

In December, Moody’s had lowered its GDP growth projection for India by 90 bps to 4.9% for the financial year 2019-20. In its latest bimonthly monetary policy statement in December, the Reserve Bank of India cut its FY20 growth projection for the domestic economy by a sharp 110 bps to 5%, citing (extension of) ‘sequential deceleration to the sixth consecutive quarter’.

According to the first advance estimate released by the National Statistical Office (NSO), economic expansion will crawl to just 5% in FY20, the lowest since the global financial crisis of FY09, as a slowdown in investment and private consumption might linger through the second half of the fiscal.

Coronavirus outbreak has diminished optimism about prospects of an incipient stabilisation of global growth this year. Moody’s has revised global growth forecasts down by 20 bps to 2.4% for 2020. Global GDP grew by 2.6% in 2019, significantly below the 3.2% growth rate in 2018.

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