Moody’s cuts growth forecast for India to 5.8pc

The ratings agency had lowered India's growth forecast to 6.2pc from 6.8pc in August

NEW DELHI: Moody’s Investors Service on Thursday cut its growth forecast for India for the fiscal year that began in April to 5.8pc from 6.2pc and said a weaker growth outlook will dampen the prospects for fiscal consolidation.

The ratings agency had lowered India’s growth forecast to 6.2pc from 6.8pc in August.

India’s growth fell to a six-year low of 5pc in the April-June quarter led by weak demand for consumer products and stress in the financial sector, prompting the central bank to cut its 2019-20 growth forecast to 6.1pc last week from 6.9pc.

Moody’s forecast Asia’s third-largest economy would grow 6.6pc in fiscal 2020/21 starting next April.

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“Compared with only two years ago, the probability of sustained real GDP growth at or above 8pc has significantly diminished,” the global ratings agency said in a note.

The agency expects the government to run a fiscal deficit equivalent to 3.7pc of gross domestic product this fiscal year, compared with the government’s target of 3.3pc, following New Delhi’s decision to cut the corporate tax rate, which will cost about 1.5 trillion rupees in tax revenues.

It also said that a long period of weak growth will hamper the government’s fiscal consolidation plans.

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