Moody’s Investors Service cuts India’s GDP growth to 5.8% for FY20

Moody’s Investors Service slashed its 2019-20 GDP growth forecast for India to 5.8% from 6.2% earlier, saying the economy was experiencing a major slowdown due to numerous factors.

The projection is lower than 6.1% that the Reserve Bank of India (RBI) had forecast just last week.

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Moody’s attributed the deceleration to an investment-led slowdown driven by financial stress among rural households and weak job creation.

The report said “The drivers of the deceleration are multiple, mainly domestic and in part long-lasting’.

It expected the growth to pick up to 6.6% in 2020-21 and to around 7% over the medium term.

Last month, the Asian Development Bank and the Organisation of Economic Cooperation and Development lowered the 2019-20 growth forecast for India by 50 basis points and 1.3 percentage points to 6.5% and 5.9%, respectively.

Last week, the RBI also cut its growth projection for the economy to 6.1% from an earlier estimate of 6.9%.

In June, Fitch cut India’s growth forecast for the current fiscal for a second time in a row to 6.6%. It had earlier in March lowered the growth estimate for 2019-20 to 6.8%, from 7% projected earlier, on weak momentum of the economy.

Moody’s said the drivers of the deceleration are multiple, mainly domestic and in part long-lasting.

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

While private investment has been relatively weak since 2012, consumption which makes up about 55% of GDP had remained robust.

The government has estimated that the corporate tax cut will reduce revenue by around Rs 1.45 lakh crore or about 0.7% of GDP in 2019-20.

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