New Delhi: Global rating agency Moody’s Investors Service, on Monday, cut India’s growth forecast to 5.4 per cent for 2020 from 6.6 per cent projected earlier on slower than expected economic recovery.
Moody's growth projections are based on calendar year and as per its estimates, India’s GDP grew 5 per cent in 2019.
Moody’s peer Fitch Ratings had last month cut the country’s GDP growth forecast for 2019-20 fiscal year to 4.6 per cent and said growth would recover to 5.6 per cent in FY21.
In its update on Global Macro Outlook, Moody’s said India’s economy has decelerated rapidly over the last two years but it expects economic recovery to begin 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 per cent for 2020 and 5.8 per cent for 2021, down from our previous projections of 6.6 per cent and 6.7 per cent, respectively,” Moody’s said.
With a weak economy and depressed credit growth reinforcing each other, Moody’s said, “It is difficult to envision a quick turnaround of either, even if economic deceleration may have troughed.”
On the fiscal front, it also said that the Union Budget 2020 did not contain a significant stimulus to address the demand slump. “As similar policies in other countries have shown, tax cuts are unlikely to translate into higher consumer and business spending when risk aversion is high,” it said.
Expecting an additional easing by the central bank, Moody’s said, “If the recent rise in CPI inflation, mainly as a result of higher food prices, is seen to have second-round effects, this would make it more challenging for the central bank to cut interest rates further.”
On global growth, Moody’s said the coronavirus outbreak has diminished optimism about the prospects of an incipient stabilisation of global growth this year. It expects G-20 economies to grow 2.4 per cent in 2020, a softer rate than last year.