Moody's Cuts India's Growth Forecast to 5.6%

IANS 14 November 2019

Economy & Nation

After cutting India's sovereign ratings, Moody's Investor Services on Thursday cut India's growth forecast to 5.6%, from its earlier 5.8% due to subdued consumer demand, along with sluggish liquidity supply.

Accordingly, the ratings agency revised downwards its growth forecast for India to 5.6% in 2019, from 7.4% in 2018.

"We expect economic activity to pick up in 2020 and 2021 to 6.6% and 6.7%, respectively, but the pace to remain lower than in the recent past," the ratings agency said in Global Macro Outlook 2020-21.

"India's economic growth has decelerated since mid-2018, with real GDP growth slipping from nearly 8 per cent to 5 per cent in the second quarter of 2019 and joblessness rising."

In the current slowdown consumption demand has 'cooled' notably, the ratings agency said.

Last week, Moody's had changed the outlook on the Government of India's sovereign ratings to negative from stable and affirmed the Baa2 foreign-currency and local currency long-term issuer ratings.

Moody's had also affirmed India's Baa2 local-currency senior unsecured rating and its P-2 other short-term local-currency rating.

India's credit rating at Baa2 is the second lowest investment rating and Moody's has warned that India could be heading for a debt trap and recessionary phase.

Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

Comments

User

Govinda Warrier

6 years ago

Last week's quick response from the finance ministry to another aspect of Moody's report, though likely to be dubbed "damage control effort" has to be welcomed as the statement goes beyond being defensive and carries some facts and figures supporting long term optimism.
But the international stakeholders, who should be investing in India or doing business with this country are more dependent on the language with phonetics like Baa2 or BBB- and therefore, ideally, India should prioritize creation of a trust-worthy rating agency of international repute headquartered in India, if necessary, associating willing BRICS countries.

The above suggestion is in the context that the rating agencies with 'brand names' like Moody's, Standard & Poor's and Fitch look elsewhere for guidance and are ill-equipped to go deeper into the "SWOT" inherent in the emerging economies like India. They are, bluntly put, extended arms of external vested interests.

Time is opportune to have a professional rating agency of international repute "Made in India" which will factor-in inter alia, India's hidden domestic resources, relatively lower consumption needs and do some country-specific research about the country's economic strength, as was done by Abhijith Banerjee and associates in the field of poverty.

M G Warrier, Mumbai