Will India’s GDP ever grow at 8% or above? Moody’s has lowered chances; here’s why

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Published: October 10, 2019 1:21:02 PM

Moody’s Investors Service on Thursday cut India’s GDP growth forecast for FY20, owing to slowdown, triggered by fiscal stress among rural households and muted job creation.

India's real GDP growth has declined in each of the past five quarters, falling to 5 per cent year-on-year in April-June 2019 from 8.1 per cent in January-March 2018.India’s real GDP growth has declined in each of the past five quarters, falling to 5 per cent year-on-year in April-June 2019 from 8.1 per cent in January-March 2018.

Moody’s Investors Service on Thursday cut India’s GDP growth forecast for FY20, owing to slowdown, triggered by fiscal stress among rural households and muted job creation. The global rating agency lowered growth estimate to 5.8 per cent from 6.2 per cent earlier. It comes after the RBI last week lowered its growth projection for the economy by 80 basis points to 6.1 per cent for FY20. Asian Development Bank (ADB) and the Organisation of Economic Co-operation and Development (OECD) also cut the FY20 growth forecast for India by 50 basis points and 1.3 percentage points to 6.5 per cent and 5.9 per cent, respectively.

“Although we expect a moderate pick-up in real GDP growth and inflation in the next two years, we have revised down our projections for both. Compared with two years ago, the probability of sustained real GDP growth at or above 8 per cent has significantly diminished,” Moody’s also said in the report.

The global rating agency said that the growth may boost up to 6.6 per cent in FY21 and nearly 7 per cent over the medium term. “We forecast real GDP growth to decline to 5.8% in the fiscal year ending in March 2020 (fiscal 2019*) from 6.8% in fiscal 2018, and to pick up to 6.6% in fiscal 2020 and around 7.0% over the medium term,” the report added.

Also read: World Bank says 2019 Asia-Pacific growth to slow to 5.8% on trade tensions

India recorded a dismal growth rate of 5 per cent in the first fiscal of FY20 on account of the ongoing consumption slowdown. The government has announced a slew of economic reforms in the past few weeks to pull up the sagging economy. The reforms range from doing away with the enhanced tax on FIIs to bank recapitalisation.

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