Moody’s Investors Service has pegged India’s gross domestic product (GDP) growth for the current financial year at 5.8%, lower than what the Reserve Bank of India (RBI) projected last week at 6.1%.
India’s growth will remain weaker than in the recent past, and the drivers of the deceleration are multiple, Moody’s said.
“We forecast real GDP growth to decline to 5.8% in the fiscal year ending March 2020 (fiscal 2019) from 6.8% in fiscal 2018, and to pick up to 6.6% in fiscal 2020 and around 7% over the medium term,” the rating agency said.
The fiscal year ending in March 2020 is internally considered by Moody’s as fiscal 2019.
Moody’s also said that though the prospects for fiscal consolidation looked limited, rapid deterioration was unlikely.
“With the recently announced corporate tax cuts and lower nominal GDP growth, we now expect a Central government deficit of 3.7% of the GDP in fiscal 2019, marking a 0.4 percentage point slippage from its target,” it said.
The government’s tax cuts, combined with lower nominal GDP growth, dampened the outlook for fiscal consolidation and increased the risk that the debt burden, currently relatively high, might not stabilise, the agency said.
This denoted a weaker medium-term fiscal outlook than what Moody’s had previously expected.