Global rating agency Moody’s Monday cut India’s growth forecast for 2020 to 5.4 per cent from 6.6 per cent projected earlier, stating that any economic recovery will be “shallow” and “slower” than previously expected.
“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 per cent for 2020 and 5.8 per cent for 2021, down from our previous projections of 6.6 per cent and 6.7 per cent respectively,” Moody’s said in its update on Global Macro Outlook, adding that India’s economy has decelerated rapidly over the last 2 years and recovery is likely to be ‘shallow’.
Last week, S&P — while affirming India’s sovereign rating at ‘BBB-’ — had said the economic growth rate is likely to improve to 6 per cent in FY21, 7 per cent in the following fiscal and 7.4 per cent thereafter. It said that India’s structural growth outperformance remains intact despite a notable deceleration in economy.
Quick turnaround unlikely
Moody’s — which estimated that India’s GDP grew 5 per cent in 2019 — had, in November 2019, projected growth in 2020 and 2021 at 6.6 per cent and 6.7 per cent, respectively. Stating that the key to stronger momentum would be the revival of domestic demand and bank credit growth, the rating agency said that Budget 2020 did not contain a significant stimulus to address the demand slump. With a weak economy and depressed credit growth reinforcing each other, Moody’s said “it is difficult to envision a quick turnaround of either, even if economic deceleration may have troughed”.
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