Rating agency Moody’s Investors Service has slashed India’s GDP growth forecast for FY 2020. Moody’s has lowered the earlier growth rate estimate for the financial year to 6.4% to 5.4%, while the GDP growth estimate for 2021 has also been reduced to 5.8% from 6.7%.
The agency said that the slowdown in the global economy due to the coronavirus, the pace of growth in India’s GDP growth may be reduced. Moody’s said that in the year 2020, the economy of the G-20 countries is projected to grow by 2.4%. Moody’s also lowered China’s growth rate estimate to 5.2% this year and 2.4% for 2021.
Global rating agency Moody’s has said that the effects of reforms in the Indian economy will be modest. The agency has said that India’s economy has been witnessing a rapid decline for the last two years. The economy grew by 4.5% in the third quarter of the current financial year.
The boom in PMI index data is indicating that the economy has stabilized. Although the economy has shown signs of advance within the current quarter, the growth rate will be under than earlier estimates.
The agency has said that to raise the economy, increasing domestic demand is incredibly necessary. Along with this, credit growth is additionally necessary. According to the RBI report, credit growth in the last year has been significantly impacted by the reduction in loans from banks with NBFCs.
The agency says that despite the rate cut by RBI, Indian banks are neither showing much interest in lending nor are willing to reduce loan rates more. As a result, non-food bank credit growth stood at 7% in December 2019 compared to 12.8% in the year-ago period. The credit growth situation in the commercial sector is worse.
The nominal credit growth of the industry stood at 1.6% in December 2019, while the credit growth of the service sector stood at 6.2% and credit growth to the agriculture sector was 5.3%.
