Moody's Lowers India's Projected GDP Growth Rate To 5.6% For 2019-20 Fiscal

International credit rating agency Moody’s Investors Service on Thursday lowered India's projected Gross Domestic Product (GDP) growth rate to 5.6 per cent for 2019-2020 fiscal, saying GDP slowdown in the country is lasting longer than previously expected.

Moody's changed it stance on India's rating from 'stable' to 'negative'. (Image: Getty)

New Delhi: In what might come as a big shocker for the Central government, the International credit rating agency Moody’s Investors Service on Thursday lowered India's projected Gross Domestic Product (GDP) growth rate to 5.6 per cent for 2019-2020 fiscal, saying GDP slowdown in the country is lasting longer than previously expected. Moody's had earlier projected India's GDP growth for the current financial year at 5.8 per cent. The reduction in growth projection comes days after the international agency changed it stance on India's rating from 'stable' to 'negative'. The credit rating major also stated that the slip in growth projection were due to subdued consumer demand, along with sluggish liquidity supply. Accordingly, the ratings agency revised downwards its growth forecast for India to 5.6 per cent in 2019, from 7.4 per cent in 2018. "We expect economic activity to pick up in 2020 and 2021 to 6.6 per cent and 6.7 per cent, respectively, but the pace to remain lower than in the recent past," news agency IANS quoted the ratings agency as saying in Global Macro Outlook 2020-21. It said investment activity in the country was muted even before this, but the economy was buoyed by strong consumption demand. "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 of 2019 and joblessness rising," it said adding that the current slowdown consumption demand has 'cooled' notably. Last week, Moody's had changed the outlook on the Government of India's sovereign ratings to negative from stable and affirmed the Baa2 foreign-currency and local currency long-term issuer ratings. Moody's had also affirmed India's Baa2 local-currency senior unsecured rating and its P-2 other short-term local-currency rating. India's credit rating at Baa2 is the second lowest investment rating and Moody's has warned that India could be heading for a debt trap and recessionary phase. Moody's had in October lowered its growth forecast for India to 5.8 per cent from 6.2 per cent and said a weaker growth outlook will dampen the prospects for fiscal consolidation. In the same month, the International Monetary Fund (IMF) also lowered India's GDP growth forecast to 6.1 per cent in 2019 and 7 per cent in 2020. However, IMF also clarified that the country still retain its position as the fastest-growing major economy of the world, sharing spot with China. India's economy grew at a pace of 5 per cent year-on-year between April and June, its weakest pace since 2013, which had prompted a slew of interest rate cuts by the Central Bank and forcing the government to cut corporate taxes sharply. The second quarter GDP data will be released later this month. Even India's retail inflation for the month of October 2019 skyrocketed to 4.62 per cent from 3.99 per cent in September 2019, reaching a 15-month high, government data released on Wednesday stated.