Moody's Investors Service in its latest report has lowered 2019 gross domestic product (GDP) growth forecast for India to 5.6 per cent, which is lower than 7.4 per cent growth in 2018, as slow employment growth weighs on consumption. Moody's future said that it expects economic growth to pick up in 2020 and 2021 to 6.6 per cent and 6.7 per cent, respectively, but sees the pace of growth remaining lower than past.
It noted that 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 (April-June) of 2019. It further slipped to 4.5 per cent in July-September quarter.
Besides, it highlighted that fiscal measures undertaken by the government - such as corporate tax rate cuts, bank recapitalisation, infrastructure spending plans, support for the auto sector and others - do not directly address widespread weakness in consumption demand, which has been the chief driver of the economy. Moreover, it said that interest rate cuts by the Reserve Bank of India (BRI) are not being adequately transmitted to lending rates because of the credit squeeze caused by disruption in the non-bank financial sector.
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