Moody’s Investors Service in its ‘Global Macro Outlook: 2018-19’ has trimmed India’s gross domestic product (GDP) growth forecast for 2018 to 7.3 percent from 7.5 percent projected earlier. However, it kept the growth forecast for 2019 unchanged at 7.5 percent. It noted that the Indian economy is in cyclical recovery led by both investment and consumption, but rising fuel prices and tighter financial condition will weigh on the pace of acceleration.
According to the report, an acceleration in rural consumption, aided by higher minimum support prices and a normal monsoon, would help the economy grow. It also said that the private investment cycle will continue to make a gradual recovery, as twin balance-sheet issues - impaired assets at banks and corporates - slowly get addressed through deleveraging and the application of the Insolvency and Bankruptcy Code. However, it cautioned that the ongoing transition to the new Goods and Service Tax (GST) regime could weigh on growth somewhat over the next few quarters, which poses some downside risk to the forecast. But, it expects these issues to moderate over the course of the year.
For the world economy, Moody’s expected 2018 to be a year of robust global growth, similar to 2017. However, it said that global growth will likely moderate by the end of 2018 and in 2019 as a result of a number of advanced economies reaching full employment, and because of rising borrowing costs and tighter credit conditions in both advanced and emerging market countries that will hamper further acceleration.