Citing rising oil prices and tighter financial conditions, Moody’s Investor Service on Monday reduced the 2018 growth projection for India to 7.3 from the previous estimate of 7.5 per cent. However, the agency did not alter its 2019 growth forecast which remains at 7.5 per cent.
“The Indian economy is in cyclical recovery led by both investment and consumption. However, higher oil prices and tighter financial conditions will weigh on the pace of acceleration. We expect GDP growth of about 7.3 per cent in 2018, down from our previous forecast of 7.5 per cent. Our growth expectation for 2019 remains unchanged at 7.5 per cent,” it said in an update of its ‘Global Macro Outlook: 2018-19’.
The investor agency also said that the growth is likely to benefit from a normal monsoon season supported by higher minimum support prices (MSP). However, the transition to the Goods and Services Tax (GST) regime is likely to have some downside risk on the growth projections, the agency noted.
“Global growth will likely moderate by the end of 2018 and in 2019 as a result of a number of advanced economies reaching full employment, and because of rising borrowing costs and tighter credit conditions in both advanced and emerging market countries that will hamper further acceleration,” it said.
The agency noted that globally, the ongoing financial market turbulence in emerging market countries pose risks of a broader negative spillover effect on growth for a range of countries, and high oil prices will be detrimental to consumer demand. It analysed that a re-escalation of trade tensions between the US and China is another risk factor to the growth.