Moody's cuts India 2020 GDP forecast to 5.4% vs. 6.6% previous

Moody's Investors Service, the US-based ratings agency, on Monday, slashed its 2020 growth forecasts for India to 5.4% from 6.6% forecast earlier.

Key Findings:

Expect a shallower recovery in Asia's third-largest economy given that global growth will likely take a hit following the virus outbreak in China.

Improvements in the latest high frequency indicators such as PMI data suggest that the economy may have stabilized.

While the economy may well begin to recover in the current quarter, we expect any recovery to be slower than we had previously expected.

Accordingly, we have revised our growth forecasts to 5.4% for 2020 and 5.8% for 2021, down from our previous projections of 6.6% and 6.7%, respectively.

A key to stronger economic momentum would be the revival of domestic demand, both rural and urban. But equally important is the resumption of credit growth in the economy.

As data from the Reserve Bank of India (RBI) shows, credit impulse in the economy has deteriorated throughout the last year as a result of the drying up of lending from non-bank financial institutions as well as from banks. The deterioration in credit growth to the commercial sector is particularly stark.

Earlier on Monday, Moody’s revised global growth forecasts down by two-tenths of a percentage point.

• Moody's: Coronavirus dents optimism just as global economy showed signs of stabilization