Moody's cuts India's GDP growth projection to 5.4 pc for 2020

In its update on Global Macro Outlook, Moody's said India's economy has decelerated rapidly over the last two years and expects the economic recovery to begin in the current quarter.

17th Feb 2020
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Moody's Investors Service on Monday slashed India's growth forecast to 5.4 percent for 2020 from 6.6 percent projected earlier on slower than expected economic recovery.


In its update on Global Macro Outlook, Moody's said India's economy has decelerated rapidly over the last two years and expects the economic recovery to begin in the current quarter.


India



"We expect any recovery to be slower than we had previously expected. Accordingly, we have revised our growth forecasts to 5.4 percent for 2020 and 5.8 percent for 2021, down from our previous projections of 6.6 percent and 6.7 percent, respectively," Moody's said.


The growth projections are based on the calendar year, and as per its estimates, India has clocked a GDP growth of 5 percent in 2019.


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 said, 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 added.


Moody's said it expects additional easing by the RBI. However, 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, it added.


About global growth, Moody's said the coronavirus outbreak has diminished optimism about prospects of an incipient stabilisation of global growth this year.


Global GDP growth forecast has been revised down, and Moody's now expects G20 economies to collectively grow 2.4 percent in 2020, a softer rate than last year, followed by a pickup to 2.8 percent in 2021.


We have reduced our growth forecast for China to 5.2 percent in 2020 and maintain our expectation of 5.7 percent growth in 2021, it added.


(Edited by Suman Singh)

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