Moody's cuts growth forecast for India to 5.8%

Says weaker outlook will dampen prospects for fiscal consolidation

Reuters October 10, 2019
Says weaker outlook will dampen prospects for fiscal consolidation. PHOTO:REUTERS

NEW DELHI: Moody's Investors Service on Thursday cut its growth forecast for India for the fiscal year that began in April to 5.8% from 6.2% and said a weaker growth outlook will dampen the prospects for fiscal consolidation.

The ratings agency had lowered India's growth forecast to 6.2% from 6.8% in August.

India's growth fell to a six-year low of 5% in the April-June quarter led by weak demand for consumer products and stress in the financial sector, prompting the central bank to cut its 2019-20 growth forecast to 6.1% last week from 6.9%.

Moody's forecast Asia's third-largest economy would grow 6.6% in fiscal 2020/21 starting next April.

"Compared with only two years ago, the probability of sustained real GDP growth at or above 8% has significantly diminished," the global ratings agency said in a note.

The agency expects the government to run a fiscal deficit equivalent to 3.7% of gross domestic product this fiscal year, compared with the government's target of 3.3%, following New Delhi's decision to cut the corporate tax rate, which will cost about 1.5 trillion rupees in tax revenues.

It also said that a long period of weak growth will hamper the government's fiscal consolidation plans.

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